Did you get the memo? Trading is hard, no matter what the brokers are telling you. With the average regulated online broker now needing to alert users to the probability of losing. Here’s a classic disclaimer you can see on the bottom of one leading broker’s website:
“CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The value of your investments can fall as well as rise, which could mean getting back less than you originally put in. Past performance may not be indicative of future results. All trading involves risk.”
Let’s be very clear then. 2021 has seen the evolution of the meme trade, with forums like Reddit boosting the amount of retail traders willing to get a slice of the trading action. As a result, derivatives trading brokers and crypto exchanges have seen a mass influx to their registration numbers. But this doesn’t mean trading is easy.
This new type of trading might make it seem that way. It may well be accessible, but easy it is not. The majority of traders lose money. The 20% of winners are composed of experts like money managers, institutional traders and even algorithms that are realizing profits. For the other 80%, they are learning the hard way. And that’s why many new retail traders never reinvest once they have lost their initial deposit.
What’s the solution?
As with many things in life, the answer to this is education, practice, and more education. To make a living out of trading, or even to see real profits, a trader needs to understand there will be losses along the way. The trick is to minimize those losses and extend the gains thus keeping your capital afloat for as long as possible. This is done through risk management. This is something a new trader needs to learn.
Additionally, there are a number of ways to increase profit potential. This is where both technical analyses, e.g. using charts to identify trends, to spot entry and exit points and to generate trading signals come into their own. Other traders use the news and key events to understand how this might impact the markets through what is known as fundamental trading.
The importance of practice
Another key tool to add to a trader’s arsenal is the demo or practice account. It is via this that a trader can learn the markets and test his or her strategies before committing real funds.
One blockchain based company has taken all of this and pushed into a neatly packaged smart product, called NewsCrypto. They offer cryptocurrency market analysis and a trading education platform that could be a savior to many new traders. Their goal is to educate crypto traders, in order to give them the tools they need to start turning over more profitable trades than losing ones.
The company is self-funded, and they offer staking of their very own coin the NCW via their platform. Their app is available to download via the app store or Google Play and can be used on the desktop too.
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They offer traders education, indicators to understand what the markets are doing, a simulator to test strategies, and they plan to roll out more features over time.
Traders can use centralized platforms like brokers or decentralized platforms to trade cryptos and other assets, but one thing all traders have in common is the need for ongoing education and practice.