In order to become a successful investor in the financial market, you need to have clear financial goals and devise an investment strategy which suits your goals. You should have clear understanding of the market trends and learn how to minimize the risks by investing in diverse asset classes. Even when you are investing in stocks, you should not concentrate on one particular company or sector. You should invest in companies from different sectors and also different sizes to ensure minimum risks and higher ROI.
Maintain Diverse Portfolio of Assets:
The first important tip for a successful investor is asset allocation. You should know how to strike a balance between various asset classes including stocks, commodities, government bonds, mutual funds and other categories of assets. By investing in different asset classes, you will remain profitable under varying market conditions. You should clearly analyze your risk tolerance, investment duration and financial goals in order to determine which asset classes are suitable for you. The behavior of each asset class will vary based on the market conditions and you should understand this behavior to invest wisely. For instance, when US dollar is increasing and there is increase in interest rates, then prices of commodities like gold and silver will reduce. Also when there is surge in the price of crude oil, stocks will decline and all the stock indices will go down. You should understand such basic trends and follow the right investment strategy in order to become a successful investor in the financial market. You should learn about the risk/reward profile of each asset before investing in it. Risk management is the most important skill you need to have in order to become a successful trader and you should also know how to manage your funds effectively. You can also follow different asset-allocation strategies like satellite tactical asset allocation or strategic asset allocation to match with your financial goals. The various asset classes that a successful trader should plan to invest include:
Stocks: They are traditional asset classes which can be grouped based on dividend yield, growth, market-cap and market value etc.
Government Bonds: Bonds promise the investors a regular income in form of interest and also repay the principal amount on maturity of the bond. You can invest in Government bonds as well as corporate bonds from both domestic and foreign markets.
Commodities: Commodities like Gold and silver are considered as safe haven on investment as they can be used to hedge against market fluctuations. Other commodities include energy products, agricultural products etc.
Derivatives: They include binary options, stock options and futures contracts.
Collectibles like rare coins, historical documents and artwork are also considered as long-term investment by some traders.
Use Technical Analysis Tools:
In order to predict the market trends accurately and to find out the exact position to buy your assets, you should learn to use technical indicators. They will help in analyzing the price movement of various assets and also to confirm the probability of continuity in movement in same direction. You can use the technical indicators to find out when to buy and sell your assets. Some of the commonly used technical indicators are moving averages and candlestick charts. Technical Indicators like STARC bands can provide information as to when you must wait and when it’s not the right time to buy certain assets. In order to find the perfect entry positions for certain assets you can use tools like Fibonacci retracement, Exponential moving averages and pivot point analysis. When the market is bullish and trending upward, you can use the 20-day Exponential Moving Average to find out the perfect entry point for your trade. As with forex currency trading, investors make use of support and resistance levels to determine the entry and exit points for each trade.
Be Aware of Market Trends:
You should always be aware of what is going on in the market and keep watching market news regularly. You should have the economic calendar always with you and watch out for important financial events during the fiscal year. Important announcements like changes in monetary policy or interest rates by the Government can play a major role in changing market trends which you should be aware of. Trends are what helps traders to capture profits. You should do your own market research and not blindly follow the investment advice from other experts. You should also be aware of increase in supply and demand of various assets like commodities, currency pairs etc. which will result in changing market trends. This will help you to accurately determine the entry level for purchasing an asset. You should always follow the market trend and never go against it. It means that you should not sell when there is upward trend in the market and should not buy when there is downward trend.
Follow Trading Strategies:
You should also follow certain investment strategies in order to remain a successful trader. If you are a beginner, you should have a good strategy for all your trades to minimize your losses and to protect your profits. There are different methods of trading such as day trading, swing trading, scalping and position trading. You should choose the trading method based on your investment goals and risk tolerance. Day trading is where you purchase and sell stocks on the same day and it involves more risk when compared to position trading which involves purchasing and holding a stock for longer duration. You can also follow various trading strategies like Breakout strategy, Trend trading, Correlation strategy etc. If you want to maximize your profit, you can you can trade any asset you want with binary options. Binary options involves speculating the price movement of various asset classes and have high profit when compared to other forms of investment.