We’re sure this isn’t the first article you have come across that gives you tips about trading with as little risk as possible. Unfortunately, we have found that most of these articles have too many suggestions.
“Twelve ways to trade” and “15 easy ways to trade without risk” are articles with too many instructions to take note of. We have broken it down to just three tips you can commit to memory, so you don’t have to get a ring binder out to keep a note of all the tips people supply you with online.
For those looking to make small incremental gains on their savings, you might want to consider other options before trading. Trading can be a much more profitable way to invest your money, but it comes with a lot more risk and you could lose all your money.
For example, one specific trading instrument that people use is savings bonds, backed by central government funds. Although they don’t provide the highest return, they are often considered the safest way to make a small return on your savings without entering the turbulent and volatile trading world.
However, if you have already considered all the options and want to proceed, let’s look at our first tip.
Table of Contents
#1 – Follow the news
Regardless of what market you are looking to trade in, knowing how to make sense of business news and how it will impact your trading is one of the main ways in which professionals get ahead. For example, many traders made a lot of money when shorting Tesla in 2022.
Reading between the lines, some investors felt that Elon Musk purchasing a social media behemoth like Twitter and looking to manage both corporations at once would be impossible, even for him.
Once his actions and tweets clearly showed that all his time and energy was going into a social media website and not an innovative electric car company, institutions such as investment banks and hedge funds and even some retail investors shorted the stock.
The same applies to forex trading. Suppose you can digest how economic news is panning out and base a trade purely on central government and monetary policy. In that case, you can make money from buying and selling foreign currencies. Of course, there’s far more to it than this; you must implement this strategy and technique in concert with other tips, but it is a big piece of the puzzle.
#2 – Understand the market
As well as how the news drives the market, learning about the assets you are trading is essential. There are countless stories of investors and traders who have gone into stock trading, cryptocurrency or commodities with zero knowledge and paid a severe price.
We aren’t saying you should become the next Warren Buffett, but having a basic grasp of a market isn’t bad advice if you’re willing to put thousands of your hard-earned dollars into that market.
If you are trading commodities, find out what drives the price of gold, silver or oil. Whatever the market, make sure you do your research. We mean genuine research as well, not the research that people on the internet claim to do by watching a couple of YouTube videos. The more time and effort you spend understanding how the market works, the better the chance you give yourself to trade with as little risk as possible.
#3 – Stop loss and take profit limits
One of the most effective ways in which traders mitigate their risk is by setting effective benchmarks of where to buy and sell their assets. If you set yourself up with take profit and stop loss limits, you manage risk appropriately.
This prevents you from losing too much money in the event of market capitulation and helps you remove emotion from a trade if the price moves in the right direction. In addition, you can set these benchmarks up automatically on almost every trading platform to ensure you can exit a market at your chosen point.
As long as you know where to enter the market and what price you want to sell at, you have an effective plan. Imagine yourself flying into a market with no knowledge, no ability to read the news, not managing losses appropriately and no way to stop yourself from taking profit when you need to – in that case, you may as well be gambling your money away. This sounds harsh, but it is true. All too often, people believe that getting into the stock market is an easy way to make money, but the opposite is true.