With the advent of new technology in the fintech space, trading has become super-accessible to the man and woman in the street. More and more South Africans are discovering the joys of “playing the markets” from their desktops, laptops or smart devices. But there are a few misconceptions around trading, and amateur traders should be careful not to get their fingers burnt, warns GT Private Broking head trader, Nilan Morar.

“There are two distinct misconceptions about trading,” he says. “On the one hand you have those who believe it’s really easy – that you can make millions overnight. Often this involves some magic, foolproof system that someone’s trying to sell you. In truth, trading requires discipline and hard work, and typically suits those with a tolerance for risk.

“As for the magic system… ask yourself, ‘If it’s that good, why are they trying to sell it to me? Why haven’t they made their own millions and taken them to a beach in the Caribbean?’”

Nilan himself follows markets for 21 hours a day! (Which begs the question… what happens in the other three??)

“One of the first things I do when I wake is check on the Australasian markets and how they have performed so far for the day. And one of the last things I do before going to bed is to check on how the US market closes for clues on what impact that may have on our market. So I essentially follow markets from 2am, when the Australasian markets open, until the US close at 11pm.”

The second misconception is that you can’t make any money from trading.

“Of course you can make money from trading,” says Nilan. “But you have to play the game according to the rules…”

1. Start small

Keep your trades small and manageable to start with, just to get a feel for it. Never trade with capital you cannot afford to lose, and understand the risks involved with trading, so you are clear on what your potential losses could be – as well as knowing when to take profits. If you find yourself doubting the trade you’re in… get out!

2. Make a plan and stick to it

As we like to say on the trading desk: “Plan your trade. Trade your plan.”

3. Do not trade any product/instrument you do not understand

This is a no-brainer. As a new trader there are likely to be instruments you have never heard of, or don’t fully understand. Rather do some research first before jumping into any trades that involve instruments that are foreign to you.

4. Study and understand the risk assumed with any trade

Don't even consider trading until you have done your own research and educated yourself on the markets, the products you are trading, what makes these products tick and, most importantly, the risks associated with each and every trade that you make.

If you’re going to do it yourself from the outset, Nilan recommends signing up with an online trading platform that provides solid education and research.

“For example, a platform like GT247.com offers traders excellent resources such as educational seminars, online chat forums, a helpline and access to a variety of instruments, local and international, including equities, currencies, commodities and indices both as spreads and CFDs. These are all the tools a new trader needs to get out of the starting blocks and into the winner’s circle!”

Written by Nilan Morar. Article first appeared on Purple Group website.