The interest rate paid on savings accounts no longer compensates for the effect of the annual inflation, which causes our money to become less valuable. There do not seem to be and good alternatives as investment funds are often doing poorly, the prices of stocks are to variable and the economic situation is insecure. Luckily there is a profitable way to trade online on your own even in a market where prices are decreasing.
In short: Why trade online?
- Trading online is cheap: you can make a lot of money on a small budget.
- Even beginners can trade thanks to the simple software.
- You receive a free demo so you can try out trading for free.
- You do simple analysis and know exactly what your results are.
- You can automate your trades using orders.
In this article we introduce a method that is suitable for anyone and can be used to make a significant amount of money. The only thing you need for success is a volatile market and there are plenty of those!
The best way to make money on the exchange is by trading CFDs. With CFDs you can trade stocks, currency pairs (Forex), index funds and commodities. You can start trading CFDs with as little as 100 pounds and still make a lot of money with as little risk as possible. But what are the biggest advantages of this new way of trading?
You can make money in every market situation. If the price goes up, you can go long; if it goes down, you can short. When you go long you make money when the price of a stock goes up and when you short you make money when the price of a stock goes down. This way of trading makes it possible to profit from recessions!
Low fees, high profits: you can trade CFDs in a very cost-effective way at, for example, Plus500. As opposed to more traditional brokers you only pay a small fee per transaction at Plus500. You don’t pay a minimum fee per trade, which means you can profit a lot in the short term too.
Increase your profits with leverage: with online trading in CFDs you can use leverage completely free. When you deposit 100 pounds, you can open up trades up to 1000 pounds without risking more than that initial 100 pounds. The price difference eventually determines your profit or loss.
Low starter costs: when you buy stock you need quite a lot of capital, but this isn’t the case when trading CFDs. Due to low transaction fees, you can make money even if you only have a small budget.
Trading online with Plus500
Plus500 makes it simple and easy to try out trading. Opening a demo account only takes a few minutes and the only thing you need to provide is a valid email address and a password. That way you can see for yourself if trading is something for you. With the demo you can practice your trading skills, so you don’t need to deposit your own money right away to get started.
New possibilities every day
Trading isn’t all that hard; it’s actually quite simple! Unfortunately, for some people trading can be difficult due to their temperament. Before we jump into that, let’s look at the three possible directions a financial instrument can move in:
- Up: an upwards trend, the price is mainly going up. Buying is wise.
- Down: a downwards trend, the price is mainly going down. Selling is wise.
- Sideways: the price is mostly bouncing between two points. Buying at the lowest point and selling at the highest point is recommended.
When you start by trading online, it’s recommended that you don’t get carried away with any technical indicators. These indicators can help you with your timing, but eventually the naked eye is what really rakes in the money; 75% of your strategy is determining the direction of the price.
On any charts showing changes of a price over time you can draw two horizontal lines: support and resistance. The resistance is the line where the price isn’t going over; the price at which sellers can no longer get buyers to buy. The support is the line that the price isn’t going under; the price at which buyers can no longer get sellers to sell.
The more often such a pattern returns, the stronger the line becomes and the smaller the chances are that these lines will be breached. When you start trading, it’s recommended that you look for a clear trend. It doesn’t matter which one of the three trends you spot, as long as you make the right choice to buy or sell.
Online trading only takes 10 minutes a day?
Your strategy doesn’t have to take up more than 10 minutes per day. When trading CFDs online, you can use so-called orders. You set them to buy a stock at a price level you feel the price will drop to and then set a sell order at the price you think it will then climb to.
Do keep in mind that you should use a stop loss. By using a stop loss, you can determine the moment your position will automatically close and take a loss. Place the stop loss right below the resistance level, so that positions based on false breaches will close fairly quickly. It’s an art to make sure you make more than you lose.
Always use a ratio between reward and risk of at least 2:1. Thus, when you are willing to take a loss of 100 pounds on a trade you want to at least make 200 pounds on that same trade. You don’t close the trade until you have either gained or lost that much. By using take profit and stop loss, you can let the orders do the work for you and your emotions won’t get the better of you.
Finally, managing risks is very important. Never risk more than 2 percent of your total holdings on a single trade. This way you make sure you don’t lose everything before your trades start heading towards the green again.
If you are consistently able to spot patterns and manage the risks, you can start to make a decent amount of money. All successful and professional traders work according to the principle of high profit and low losses. If you do this, you cannot go wrong.
Show me the money!
You are probably curious about the results you can expect when you apply such risk management. For example, suppose 6 of your 10 trades are profitable and you ensure that your profits are higher than your losses:
- 6 X 4% (2X maximum risk) = 24%
- 4 X 2% (maximum risk) = 8%
- Return = 16%
Not a bad return on ten trades! What would happen if you only win on 4 trades?
- 4 X 4% (2x maximum risk) = 16%
- 6 X 2% (maximum risk) = 12%
- Return = 4%
Even when you think you’re doing badly, with only 4 out of 10 trades being wins, you make money! The strength of a great trader isn’t being smart or having a huge amount of capital. It’s all about money and risk management!
With an investment of 10,000 pounds you could make 1600 to 400 pounds a month. That's pretty good, right? If you keep reinvesting this amount, you can really build a great portfolio within five years.
Get started with online trading?
The best tip that we can give you is to just get started and practice, practice, practice! You now know the basic principles, benefits and possibilities of trading CFDs. Now it’s all up to you. Plus500 is a very good broker where you can start out for free and try out trading completely risk free with a demo.
A huge advantage of the software of Plus500 is the fact that it’s so simple. Using the buy and sell buttons, you can quickly open a position and you aren’t confronted with any odd terminology. Plus500 is a great place to start trading!
- Your money is protected as Plus500UK has a license with the Financial Conduct Authority.
- Receive a sign-up bonus of 20 pounds and up to 30% deposit bonus on your first deposit*.
- Trade in all popular financial instruments from currencies to stock.
- Accessible to anyone over the age of 18.
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Useful links: start trading directly!
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