5 Trading Strategies Every Trader Should Know

It is easy to view trading as a game of prediction and chance, just like gambling. In both trading and gambling, ‘speculators’ risk an amount of money hoping to earn a return. But the outcome of gambling is solely dependent on luck, whereas in the world of trading, luck is not a viable strategy.

If you are a trader who does not have a proper trading plan or solid knowledge and understanding of what you are doing, you are essentially gambling. Placing trades based on a gut feeling or without reliable data to back up your decisions is highly risky, and your trading performance will not be consistent.

Trading is a skill that requires an understanding of market trends, price movements, important technical and fundamental information, as well as solid risk management. When you are trading, you are not exactly in a game of luck and prediction; rather, you are in a game of probability where you use your knowledge and skill to “play the odds in your favor”.

This is one of the most common online trading myths. Online CFD trading may be easily accessible, but the activity itself is far from easy. A simple search online about trading will reveal plenty of success stories by random people who are literally ‘milking the markets dry’. But a deeper assessment would reveal that most people who broadcast their trading success are just marketers and not actual traders.

The internet has been the main driver behind this myth as marketers use all sorts of tactics to lure people with “get rich quick” and “make money from home” schemes. With the promise of being able to start trading within minutes and making profits from day 1, it is no wonder that the “trading is easy” myth continues to spread like wildfire.

The reality is that most retail traders are unable to achieve consistent success in the markets. This itself should highlight how daunting it is to become a successful trader. Like any performance skill, trading requires a lot of market knowledge and research as well as strict discipline and commitment to refine and perfect. You must be willing to put in the work and commit to relentless practice and improvement if you are to achieve success in the world of online trading.

Another trading myth is that you require a lot of capital to participate in the global financial markets. This might have had some truth decades ago when retail traders had to rely on brokers to place all their trades, and the brokerage certainly wasn’t going to waste resources on a client with a few hundred dollars to invest.

The other challenge back then was the minimum lot sizes, with many assets requiring a substantial minimum trade size.

Thanks to online platforms, trading has become highly accessible for retail traders, especially CFDs. This has opened up opportunities to trade micro lot sizes and to start trading with a few hundred dollars of capital.

CFDs are also leveraged products, which means traders can control positions that are much larger than their capital outlay. At AvaTrade, for instance, you can access leverage of up to 400:1 for certain assets. That said, it is important to tread carefully with leverage because it also exposes you to potentially higher losses as well.

With a good trading plan, you can get started with a relatively small amount of money and compound it to a capital level that is consistent with your goals. The key is to have a solid trading plan and risk management strategy that will help you achieve longevity in the markets.

Many new traders are easily tricked into believing that they can trade better by using many complex indicators. This can actually cause confusion or analysis paralysis and lead to the making of bad trading decisions.

Clarity of trading signals is very important in the markets, and using many indicators does not provide this. The key is to find indicators that can complement each other in their functions.

Having a rather clean chart prevents the risk of information overload that ultimately limits quick and accurate decision-making when trading.  Knowing which type of analysis and indicators to use in different scenarios is crucial, and as with many things in life, sometimes “less is more”.

An online trading myth perpetuated by some market participants is that indicators do not work. The problem is that many traders depend on indicators to generate signals for them. But indicators are not meant to be signal generators, but rather information providers.

For instance, a moving average sloping upwards is not a signal to go long, but simply visual information that current prices are higher than past prices. It is the job of the trader to put this information into perspective and generate a trading signal or idea according to the context of the markets.

Indicators are simply mathematical formulas that provide visual information about the behavior of price. So, when used for their intended purpose, indicators do indeed work.

Another CFD trading myth about leverage is that higher leverage levels equal bigger profits. Granted, a higher leverage level will translate to more profits if trades go in your favor. But if the opposite happens, you stand to lose big money as well.

Success in trading is more about taking care of risks than chasing profits. Reduced and managed risk exposure in the markets ensures that you can stay in the markets even if you experience some losing trades.

Traders should strive for an optimal leverage level that is in tandem with the level of trading knowledge, skill and experience. If you are still learning, a conservative amount of leverage is recommended.

There is no real money to make when you trade with virtual funds, but demo trading is certainly not useless. Neither is it a tool for beginners only. A demo account is a useful learning tool, and learning never ends in trading.

Just like a top athlete consistently trains and practices before competing to hone their skills and strategies, as a trader, you need to do the same.

Even if you already have a real account, a demo account can help you to practice and try out new or tweaked trading strategies, risk-free. You can also use a demo account to try new asset classes. A demo account is your training arena, and it can help you to constantly learn and perfect your trading craft.

On the surface, it is easy to believe that if you have a good strategy, you can earn more profits if you trade more often. Online financial markets are open practically round the clock, but it does not mean you should be looking for profits 24/7.

Placing many trades decreases the edge of your trading strategy. It gets you exposed to the risks of the market more often than necessary while piling up your trading costs. You may also tend to apply your strategy prematurely.

Trading requires patience. You have to wait for high-quality, high-probability opportunities to unfold. It is about quality, not quantity. You must have a solid trading plan and stick to it with patience and discipline.  Once again, the “less is more” concept prevails.

In the age of social media, we have become accustomed to seeking validation before making decisions. Some traders do not have conviction in their trading ideas and have to seek secondary opinions before implementing them.

There is nothing wrong with learning from trading mentors and professionals, but the idea that you cannot trade by yourself is an online trading myth. With patience and continuous learning, you can get a good grasp of the online trading markets and chart a path for your own success.

There are many educational resources available for the willing learner, and you can also use a demo account to test your knowledge without risking real money. With dedication, you will be able to develop a profitable trading strategy that will help you achieve your trading goals.

Trading is not a scam! In every aspect of our lives, there are scammers, from selling fake brands to phishing schemes. The global financial markets are a huge goldmine, and it has attracted many unethical players who prey on unsuspecting traders.

Unfortunately, many shady online brokers tarnish a legit industry and exacerbate the “trading is a scam” myth. This is why is essential to only trade with reputable and regulated brokers, like AvaTrade.

Aside from the bad actors, many unsuccessful traders believe the entire trading thing is just a big scam. It is like a big rigged system designed to simply generate losses for participants. But this is not the case.

The global financial markets are real, and participants include governments, central banks, major banks, and multinationals. The problem is that most traders start with the idea that online trading markets are get-rich-quick platforms. When they fail to make quick profits, they simply brand it as a scam.

It is important to understand that trading is a business, and every business requires proper planning, learning, risk management, patience, and discipline to succeed.