Exercising Caution

By Author: Vickey Nhep
Total Articles: 6
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As everyone knows, the stock market can be extremely difficult to predict. Even traders who have been in the markets for their entire lives make wrong decisions from time to times, in many ways, the stock markets are an art and not a science.

The problem for people who are interested in spread betting or CFD trading is that if the experts aren''t able to get it right all the time, what hope can a part-time trader have, regardless of how good they are? Obviously there are no rules for avoiding getting burnt, but there are a few things that you can do to give yourself a fighting chance.

The first thing to be aware of, particularly if you''re a day trader, is that the market tends to move most profoundly at opening. Oftentimes the market opens up and then falls, but there really is no rhyme or reason to it. One way of narrowing your options is to consider the shape of the market over night, and keep an eye on the early morning press to see if momentous events happened overnight.

As well as knowing when the markets move, you need to know why. Find out the events that influence your data. A prominent example ...
... of a major event is US job data, which took on major significance at the start of the year. Everyone knew how the market would react, the trick is to predict it right. This is very difficult to do, and predicting it is a risk, so a good idea is to wait for how the market reacts and try to trade of a secondary bounce.

With market events, it''s worth bearing in mind that no news source in the world will be good enough to inform you of an event before the market takes it on board, particularly if you''re not on a trading floor somewhere. That''s why it''s difficult to wait for news and then trade, as the market will already have moved.

Of course, it''s not just major announcements and events that move the markets, the other major economies also have an impact. America opens every day at 2.30pm British time, and it often has an impact on how our market reacts. Make sure you know the opening and closing time of all the major markets, but keep a close eye on the US and China.

Of course, always bear in mind what affects your market. The FTSE has a significant number of financial institutions in its top 100, so anything like the interest rate, bank taxes, or housing prices could have an impact.

There is no guaranteed way of avoiding making a loss, all you can do is operate a stop loss and try to make the best judgements possible. Every trader, at some stage, loses money, just make sure that when it comes around for you that you don''t lose big. Vickey Nhep is a market trader and financial expert with 10 years experience of the stock market. They recommend CMC Markets for CFD trading and spread betting.