Life can be relatively simple as a beginner trader, as you’re simply required to start with a small number of assets before diversifying your efforts organically over time. Make no mistake; however, scaling up your trading efforts is far more challenging, as this will compel you to seek out bigger and better traders alongside potentially more risky investment options. Always remember that investing in stocks and shares does leave you exposed to the risk of potentially losing your investment and thus, it should only ever be done carefully and in a measured way.
Learn, Learn and Learn Some More
Whether you initially focus on trading stocks or forex, it’s crucial that you start small before scaling your efforts organically in line with experience and profitability. This should be part of a long-term focus, which prompts you to learn more about target markets and asset classes before you begin to diversify and reallocate your capital.
More specifically, you should be prepared to take classes (online or otherwise) and courses that are relevant to your preferred markets, while engaging in virtual seminars that provide detailed information. As you continue to build a large and relevant knowledge base, you can scale and diversify more effectively while minimising risk.
Utilise a Demo Account
When you use advanced platforms like the MT4 trading platform, you’ll also have access to a demo account. This can be used for a period of between three and six months on average, while it affords you access to a simulated and real-time marketplace in which you can test and hone even the most experimental strategies.
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By leveraging this type of feature, you can effectively bridge the gap between theoretical knowledge and practical trading experience, enabling you to utilise the information that you learn over time. A demo account also lets you diversify safely and introduce brand new assets, from stocks and currencies to commodities.
Trade With More Money as You Continue to Diversify
As we’ve already touched on, you should look to diversify your portfolio in line with increased profitability, as this enables you to invest incrementally more without committing outside of your means. The key is then to invest this money as wisely as possible, while simultaneously minimising the threat posed by over-diversification. This certainly has the potential to amplify risk and increase translation costs, stunting potential returns in the process.
As a currency trader, you could consider beginning slowly by incorporating one or two additional pairs into your portfolio, perhaps including a minor or exotic pair depending on your appetite for risk.
In the case of stock trading, this means researching and identifying new shares to buy, while seeking out viable indices that offer access to a broader range of equities and provide instant diversification.