Trading and investing are excellent ways to make your money work for you. If you just stick it in a savings account, it doesn’t grow that much. That is especially true right now with inflation at record levels in many countries. Unless you can maximize your savings, your money loses value in real terms.
However, all investments come with risks and if you are not careful, you could lose everything. To stop that from happening, there are some key rules you need to follow. These are the top 3 things that all traders should know.
Don’t Put All of Your Eggs in One Basket
This is probably the most important piece of advice that you will get as a trader. If you put all of your money into a single stock or cryptocurrency, you open yourself up to a huge amount of risk. If that investment goes bad, you lose everything. People end up in this situation because they do their research and convince themselves that it’s a sure thing, but regardless of how thorough you are, there is always a chance you can be wrong. That’s why it’s so important to diversify and avoid putting all of your eggs in one basket.
When choosing investments, try to spread your money between different industries and financial instruments. So, if one sector is in trouble and stock prices plummet, you still have other investments to fall back on. Don’t spread yourself too thin or you won’t see much return, but make sure that you are putting your money in different areas.
Pick a Strategy and Stick With It
Many traders make the mistake of changing their strategy too often because they don’t have a clear goal. Remember, investing takes patience so you will only see a return if you give your strategy time to work. Unfortunately, a lot of people expect results overnight and when they don’t see much change, they assume that their strategy is wrong, and they should change it. The thing is, every time you switch strategies, you start from square one again. So, you need to determine what your goals are and build a strategy around them.
If you want to build long-term wealth, research stocks or crypto assets that show steady growth over time. Put your money in and just leave it. Don’t be tempted to keep moving it around if you are aiming for long-term growth. If you want short-term returns, on the other hand, look for investments that jump up and down in value a lot. Then, track the price to determine when you should invest.
Use Multi-Time Frame Analysis
When analyzing investments, always look at multiple time frames, regardless of whether your goals are long or short-term. If you’re putting your money into cryptocurrency, check the Dogecoin current price charts as well as the historic prices. You can learn a lot of information about how the value of investments changes if you look at the full picture. Many investors make the mistake of only looking at the current time frame, but this means they cannot effectively guess what might happen next. You should always be thinking a few steps ahead, and multi-timeframe analysis allows you to do that.
Once you can get your head around these key concepts, you will be a far more successful trader.