5 essential rules to following when trading stocks, shares, or currencies from home
Guest blog post by Ben Barlow
Online trading such as Forex Trading and Spread betting has the potential to be a great source of income and potential career path for many, however there are inevitably risks associated with it. Categorised as gambling by governments around the world, and therefore free of income tax, it is a high risk, high reward game, and that’s why it’s beloved of so many. Challenging, exciting, and unpredictable, it offers the chance to make tremendous profits, balanced against the possibility of devastating losses. For those who love thrills, it can prove intoxicating.
But what if it needn’t be so high risk after all? The movements of the spread betting markets are not entirely spontaneous. It is real external factors that drive them, and this means that it is eminently possible to predict the patterns to come. What’s more, tactics have a part to play in the risks you run, and these can be minimised if you wish it.
If you’re intrigued, here’s how it works…
#1 | Do Your Research
As with any form of investing, people have a tendency to look on spread betting as little more than a game of fortune, but this is not the case. The markets are driven by a number of real-life factors, and if you’re able to understand these and the impact they have, then foretelling the future of your investments is not beyond the realms of possibility. Do your research, become an expert in the art of trading, and you’ll soon find that spread betting no longer looks as much like a gamble.
#2 | Stop Loss Orders
It is not for nothing that stop loss orders are known as ‘the trader’s best friend’. A tool specifically designed to minimise losses and catch traders before they fall, they will save you from disaster every time, and this means that they are invaluable to the risk averse, the cautious, and the prudent. Use them properly, and your spread betting future is secured. Many trading platforms, such as ETX Capital, offer this feature as a standard and once you are familiar with the practices and workings of trading this will be clear why.
Pic taken from etxcapital.co.uk
#3 | Don’t rely on it as a source of income, at first
It can be tempting once you start producing good returns from trading to believe this is the way it will always be and, if you are currently employed, to quit your job and live the dream of working from home. This is clearly a risky move and one which can only be made when you are more than certain that you have a good understanding of the markets and your source of income is stable. If you are keen to work from home, a good way to manage the transition from your full time job to working from home could be to go part time first, as a way to transition your income from employer to your own successful trades. Managing your expectations, and others, of what you expect to make from trading is key in managing the risks involved.
#4 | Don’t Bet More Than You Can Afford to Lose
It sounds obvious, but too many traders make the mistake of betting more than they can afford to lose. Leverage can be a wonderful tool for maximising profits, but it also increases the likelihood of disaster should everything go awry. The trick is to know how much you’re actually gambling with when you place your bets, and to make sure that you can spare it. Stick to this golden rule, and even your worst defeats won’t signal the end of your spread betting career. Losses are inevitable, after all, but it matters little so long as they’re recoverable.
#5 | Communicate
Working from home can be a lonely affair so it is important to keep a connection with the outside world. Of course trading stocks and shares and currency markets requires an understanding of the wider world and to keep tabs on latest news updates but that doesn’t address the personal issue of potentially becoming isolated. Keeping in touch with other traders is essential. This could also be a great opportunity to learn, communicating with others working on similar projects to you will keep you motivated and help manage any risk of becoming too inwardly focused.
Put these five simple tips into practice, and success is yours for the taking.
A bit about the author
Ben Barlow is a freelance finance writer specialising in stocks and shares, forex and ISAs. After studying business at Lancaster University, Ben worked at a number of financial institutions in London and New York and is now following his passion for writing.
