‘Tis the Season to… Learn to Trade. Top Tips From Experienced Traders

Overtrading is widely regarded as one of the main reasons inexperienced traders make a loss rather than a profit. Putting on trades that have poor risk-return ratios or entering into positions at non-optimal price points tilts the odds in favour of the market and against traders.

Applying the wrong strategy to market conditions is another sure way to lose money, and price charts confirm that quiet holiday markets have started. The S&P’s 500 hourly chart highlights how volatility has drained out of the market after a few roller coaster days. Between the close of Wall Street on Wednesday and the opening of the European exchanges on Thursday, futures in the world’s benchmark equity index traded within a 10-point price range.

S&P 500 – Hourly Price Chart – Tight Trading Range

Source: IG

Low Market Volatility

A tight sideways trading channel means that momentum trading strategies are currently unlikely to generate gains, but the range is so tight that even scalping strategies could struggle to make a turn. Even the best brokers with the tightest bid-offer spreads tend to offer spreads near to half of one point in the S&P.

Those traders and investors who are looking to use their holiday time to develop their trading skills may be disappointed by the recent turn of events. But there are still ways to build trading skills in preparation for the start of the year. The importance of protecting cash piles means trading performance is currently best improved using a ‘hands-off’ approach.

Online Training Courses

Two of the biggest brokers in the market offer alternative ways to brush up on the markets.

Podcasts: Throughout 2021, mega-broker eToro has expanded its client base to now be more than 20 million account holders. Its client-focused, simple functionality has proved globally popular and is carried over to its offering of research and analysis tools. The eToro podcasts offer market updates for those who want information on the move rather than off a screen. The latest episodes include End of Year Predictions, Crypto Updates and a recap on Key Fundamental Data.

Back-testing: Trade-specific research ideas offered by IG are released on a weekly basis. They’re a useful tool for those looking for new trade ideas and anyone with time to review their back catalogue will find they cover a wide range of markets and approaches. There’s something for everyone, but identifying the best personal fit would put traders in a better position for when activity picks back up in January.

eToro: Digest & Invest

IG: Trade Of The Week

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About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.