The growing popularity of financial markets due to positive performance across major asset classes acts as a strong motivation for new people to join and take advantage of price movements, using derivatives such as CFDs. However, online trading is a skill that needs to be mastered using proper education.
That is why new traders need to know they can learn all the necessary resources without having to take any risks until a proper trading plan had been developed and consistency had been achieved. Although learning can be completed without any risks, all people should know that live trading comes with hand with risk, since it is difficult to predict how valuations will perform 100% of the time.
Learning before trading
One of the common mistakes made by beginners is starting to trade without understanding how the industry functions. Considering there is an abundance of free online educational resources available on the web, there is no reason to start taking risks with hard-earned money before basic learning had been completed.
Popular brokerages are providing valuable resources on how to use trusted software like the MT4 platform, how people can conduct technical/fundamental analysis, how to manage risk, or how to build a trading strategy.
Using a demo trading account
Traders generally avoid or get bored when trading on a demo account, yet that is still an effective way to practice. Although trade execution will be different on a live account, trading on a virtual account will ensure there is no capital at risk until the trader is able to consistently trade effectively.
Markets take unexpected turns very often and inexperienced traders end up caught on the wrong side. For months the online media had been talking about persistent USD weakness, yet the global reserve currency had started to rise impulsively recently, some of the price action moves being driven by short covering.
Work with a regulated brokerage
Another way to reduce risk while trading online is by working with regulated brokerages. These are the companies working on behalf of their customers, providing access to competitive trading services, including assistance with education. This means traders get access to resources on topics like Forex trading, margin trading, trading psychology, or technical analysis.
Regulated companies hold operating licenses and follow strict guidelines in terms of customer privacy, financial security, KYC, and make sure that financial information will be kept away from 3rd parties.
Understand risk management
Part of the learning process, understanding risk management will be critical in determining whether a retail trader is able to consistently outperform the market, while also get past drawdown periods, without losing a lot of capital.
Live trading might come in hand with risk and that should be a strong enough reason to keep the education part of the process risk-free. Traders should not forget this is a skill-based endeavor that can be learned over time and not overnight. Cutting corners and avoiding responsibility is not how online trading should be approached.