Just as a successful business needs a solid foundation to stand, it’s also important that you make a solid foundation for your online trading business.
Last week, we offered steps on how to craft a winning trading strategy that can serve as a solid foundation for your online business. But this week we’ll focus more on what mistakes you must avoid to make the best possible online trading strategy.
1. Lack of Focus
If you have statements in your strategy like “improve your finances,” or “explore new markets,” you are committing one of the first mistakes people make. The problem with these kinds of statements is that they are too broad. How exactly will you improve your finances? Because your statement is too vague it makes it hard to create actual action steps you can follow.
A good trading strategy, in contrast, includes specific goals that can be measured, are realistic and are time bound. A strategy should help you face challenges in practical ways and provide you with the steps to achieve your long term goals. With a good strategy, you can focus your time and energy on key financial instruments that can produce tremendous results.
2. Mistaking Planning for Strategy
It’s important not to fall into the trap of mistaking a plan for having a strategy because the two are significantly different. A plan, more or less, is a course of action that sometimes reads like a to-do list. But a strategy looks at the bigger picture, studies the environment, connects all the dots, and acts based on insight to capitalize on great opportunities.
Let’s bring this to online trading: imagine if, when social media was invented in 1997, you had a suspicion that it could be big. Making a plan might only involve investing in key leading companies in the industry, but making a strategy would involve more. You would look at key trends, study competitors, and then trade stocks of promising social media companies that have immense potential.
3. Wanting too much, too quickly
By gaining access to the Global Financial Market, you are exposed to a world of opportunities such as stocks, Forex, bonds, futures and more. The potential is incredible and there is a temptation to try your hands trading different instruments. But no matter how eager you are, you need to resist the temptation to take on more than you can handle.
As an online trader, less is actually more. By focusing on a specific financial instrument like Forex or stocks, you deepen your knowledge and expertise in it and increase your chances of success. Moreover, you reduce unnecessary risk by keeping your eye on the few markets you want to master and succeed in.
4. Lacking Flexibility
The market is always in a state of change. An event in the world can in a matter of minutes lower the price of a financial instrument or send its price soaring through the roof. Because of the fluid nature of the market, one big mistake you should avoid is making a strategy that is rigid and set in stone. You need to make a strategy that is flexible and adapts with the changing market.
One caveat is that being flexible doesn’t mean being swayed by every fluctuation in the market. Rather, it means critically examining what changes may have taken place and adjusting your previously planned actions steps in a way that you are still able to work towards your main goal. Examine world events and act based on what their long terms implication could be. For instance, the recent U.S. election saw the value of the Dollar sink as the votes were being tallied. Rather than immediately selling your dollars, a flexible strategist would monitor the situation until it’s clear what the actual trend is and then take action.
5. Putting your strategy on the shelf
Making a strategy just to not use it is, by far, the biggest mistake you could make. This is bad not only because you lose the time and effort you put in but you also make it extremely hard for yourself to succeed in online trading. Morris Chang, founder of the largest silicon foundry in the world, says it best: “Without strategy, execution is aimless. Without execution, strategy is useless.”
Don’t let your strategy go to waste. Explore what online trading has to offer and take steps to implement a strategy that will help you grow and achieve your goals. As you progress in this journey know that the team at Fab Investing is perfectly equipped to advise you as you refine your strategy and help you make the most out of online trading. Download our free starting guide, The Beginner’s Guide to Online Trading, to learn what it means to be an online trader and how you can grow in this industry.
Our aim is to provide business-minded Africans with the necessary tools and resources to empower them build a successful business in online trading. We believe Africa is on the verge of a rise, and Africans will be the ones to drive the continent to the next level of economic expansion. For this reason, we dedicate our efforts to bringing to your doorstep, access to the world’s financial markets, which hold vast business opportunities.