When share trading, it can be tempting to get involved in as many trades as possible. Many people find the thrill of buying and selling shares to be rather addictive. However, without having a proper plan of action in place, you may end up finding that you make poor trading choices, which lead to you wasting money on your trades. Clearly, it is therefore a sensible idea to take certain precautions which will help you to avoid wasting either time or money when share trading:
1. Plan ahead: Think carefully about the trades you plan to make as you engage in share trading. Do they have a high chance of success? Will you be able to monitor the progress of the trade as it unfolds? Do you have an exit plan, if things go wrong?
2. Listen to your broker: If you have a broker who is licensed to give advice by the Financial Conduct Authority, then listen! The broker watches the stock markets carefully and uses data from professional analysts to reach their conclusions, so it is worth taking their advice on board, even if you eventually choose to go in a different direction.
3. Use stop losses: The last thing you want is for a carefully planned trade to go wrong, leaving you many times short of your original investment. Placing stop losses on your trades when share trading means that this situation can be avoided.
4. Get the Maths right: It is helpful to have an idea of how much money you are prepared to spend on trading. Before you begin to participate in share trading, your broker will be able to give you a reasonable estimate of this figure, if you provide him with your earnings, outgoings and any other commitments. It is important to only spend what you could afford to do without, after all.
5. Be aware: When share trading, it is highly useful to have an understanding of current political, economical and financial affairs, as these can have an effect on the prices of shares. So read up and get savvy!
Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.
Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.