It’s interesting to note that various investment markets have seen a considerable uptick in demand, with the forex market offering a relevant case in point. In fact, forex trading volumes have increased by 300% since the beginning of the outbreak, with rolling monthly growth of 50% being recorded on average.
However, it’s also known that many of these new and inexperienced traders began investing blindly and without a proper foundation of knowledge, creating significant spikes in volatility across an array of markets.
In this post, we’ll offer some advice to new traders and help them to achieve their objectives sustainably in the current market conditions.
1. Do Your Research a Base of Knowledge
Knowledge and understanding are the two main weapons for any financial market trader, particularly in volatile and derivative markets such as forex.
Make no mistake; it’s incredible to see how many investors simply fail to commit the adequate time to understand assets and the underlying laws that govern change in specific markets, causing many to lack the determinism to make informed and successful decisions.
So, while news briefs and the analysis and experts should always impact on your trades, you should be able to perform your own technical analysis of any market and rely on a broad base of knowledge.
2. Hone Your Skills Using a Demo Account
Your online brokerage platform is an excellent source of information when trading the markets, while it will also be home to a suite of analytical tools and technical indicators.
However, perhaps the most important tool at your disposal is a demo account, which enables you to access a simulated real-time marketplace and hone your skills over a period of months.
This way, you can bridge the often sizable gap between theoretical knowledge and practical understanding, while also building viable trading strategies without risking your hard-earned capital.
3. Look to the Long-term
It’s fair to say that the most successful investors in the current market adopt a long-term outlook, especially when targeting stocks.
The reason for this is simple; as the coronavirus has devalued several prominent blue-chip stocks, allowing investors the opportunity to buy these at an effective discount and wait for their price to increase incrementally in the future.
This is a tried-and-trusted investment method and one that can deliver sustainable gains over a concerted period of time.
It also taps into an underlying rule of investment, which dictates that you must have a time-frame for your trades and an appreciation of the underlying risk-reward balance.
4. Diversify Your Interests
Whenever you kick-start your investment career, it’s important to adopt a modest outlook and scale your efforts organically in line with your earnings and experience.
For example, forex traders should only deal in one or two pairings when they first enter the market, before looking to expand and target new markets as and when appropriate.
This should help you to diversify your interests over time, with a view to reducing or spreading your risk and driving optimal profits levels over an extended period of time.
Distributing your capital in this way certainly provides a form of financial safety net, especially if you combine volatile and highly-leveraged assets with more stable options such as dividend stocks.
5. Use Spare Cash or Savings to Invest
The fundamental rule of investment is that you should never commit more money than you can afford to lose, so you should never source capital from your monthly living budget.
Instead, this should come from your source of savings or disposable income, so that you can invest responsibly and manage the underlying sense of risk that’s inherent to every type of market and investment vehicle.
If you find that your disposable income levels are perennially low, try to change your financial behavior by committing a fixed amount of cash to savings every month.
Even if this is as low as 10%, it will help you to accumulate capital and build an investment portfolio in the future.