Trading Mistakes: no strategy
IG senior market analyst Axel Rudolph explains a common trading mistake known as 'trading without a strategy'.
IGTV financial analyst @AngelineOng caught up with him to find out how beginners and experts can create and test a trading plan to minimise risk and maximise gains.
(Video summary)
Having a well-defined trading strategy
In this video, we emphasise how important it is to have a plan when it comes to trading and making money.
IG senior market analyst Axel Rudolph explains explains that if you don't know what you're doing, you shouldn't expect to make profits. He argues that trading is not a simple coin flip, but rather a difficult challenge with many obstacles stacked against traders.
One obstacle discussed is the spread. This refers to the difference between the price at which you can buy something and the price at which you can sell it. This spread can eat into your potential profits.
Another issue is commission, which is a fee that you have to pay when you make a trade. This fee also reduces your potential gains. Axel also mentions slippage, which is when the market's volatility causes you to miss out on getting the desired price for a trade.
Safeguarding profits
Given these challenges, he advises traders to have a well-defined strategy in place. He suggests testing the strategy on a demo account to see if it works before using real money. By doing this, traders can gain confidence in their strategy and ensure that it will be successful.
He also encourages starting with small trades to minimize risk and continue making positive returns. To illustrate the importance of having a strategy, Axel compares trading without a strategy to driving a car without knowing how to drive. Just as driving without training often leads to accidents, trading without a strategy can result in financial losses.
Therefore, the main message is clear: to be successful in trading and make money, you must have a well-tested strategy in place. Otherwise, you're exposing yourself to unfavourable odds and potential harm.
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