5 trading tips for 2021

Like any new year, 2021 holds a lot of promise but also uncertainty. With Covid-19 still dominating the landscape, and affecting how we live, work, and trade, the picture for the next twelve months’ trading environment isn’t as clear as it could be. Here are some trading tips that could help you navigate the year ahead.

5 trading tips

What to remember when trading in 2021

Whether you’re a novice or an experienced trader, we hope some of the points below will be of use to you when trading in 2021.

Manage your risk

This goes for traders of all experience levels, regardless of market conditions. Trading, whether that’s trading CFDs, spread betting, or any form it might take, contains inherent risk. Be sure you can only commit capital that you can afford to lose. You might also consider putting stop losses or limits on your trades too.

Another key point to remember is trading is hard. While it has the potential to make great gains and big wins, it can also turn against you, resulting in losses. Even the most experienced traders have taken substantial hits along the way. The rewards can be high, the risks are high as well. That’s why managing your risk is of the utmost importance.

Realise no trading strategy is inherently superior

Whether you’re looking for day trading tips, or want to take a more measured approach, know that the best approach to market is subjective. What has worked for others may not necessarily work for you. Some traders focus more on value plays or fundamentals and are very successful. Others prefer to follow trends and trade off momentum.

What works best for you is down to how you view the market, how you protect your capital, and how you look for new stocks or assets to trade on. Markets constantly change so your strategies should adapt to meet new conditions. Keep modifying your strategy – and bear in mind profits tend to occur sporadically – and you may find success. Of course, no strategy is guaranteed to result in profit either. Keep this in mind too.

Diversify your portfolio

Diversification can help you mitigate risk as well as potentially generate profits. Having a diverse portfolio, covering multiple stocks in different sectors, and different asset classes, means you are not overly exposed to a single type of risk.

A principle of diversification is to own uncorrelated assets. At a basic level this means owning a variety of assets, such as stocks, commodities, foreign exchange and ETFs, so you do not have too much of the same thing.

Essentially, it’s about nullifying the negative effects of underperforming positions. So, if some positions are on a downward trend due to macroeconomic factors or market downturns, your other positions may gain value or hold steady.

Use your trading tools

On our platforms like Marketsx, we offer an array of different trading tools to help you make informed decisions. As 2021 may be just as eventful for the markets as 2020 was, using tools is one of our key trading tips.

For instance, there are multiple charts available on Marketsx to help track price movements, and other key metrics. All of these can potentially help you get a clearer view of what’s happening in the markets, which stocks are performing well, when to potentially buy or sell, and so on.

We also offer other tools like sentiment indicators, showing what commentators and other traders think. All of these are just recommendations, of course, and require due diligence. But tools are there to be used, and you might find you gain some extra insights that could give you an extra edge.

Remember the 80/20 rule

Newer traders might be a bit unrealistic, possibly expecting immediate profits after opening their first positions. This is usually not the case.

The 80/20 rule is something to keep in mind. It essentially means most traders make 80% of their profits 20% of the time. The rest is spent making incremental advances or losses. Don’t go rushing in expecting big bucks straight away – particularly if 2021 is as volatile as 2020 for markets. Patience is the key.

This is not a hard and fast rule though. One problem with 80/20 is that no one can really predict when peak productivity will occur for an asset or stock. Vigilance is key. Keep watching the markets and keep on top of your risk.

Further trading tips

The biggest tip we can give is to reiterate risk. Only trade using capital you can afford to lose. Be patient. Good rewards can come to those that wait. Do your due diligence and try to mitigate trading’s inherent risks as best as you can to ensure you’re equipped as best as you can to face 2021.