Welcome to Better Trades
Our goal is to make you a better trader that makes better trades. To this end we provide you with trading tutorials, introductions to different financial instruments, valuable tips and advice as well as reviews that will help you choose the right broker.
We are regularly adding more articles and we hope that you will be able to find the information you are looking for.
We are going to assume that you already have your finances in order and that you do not need advice on how to balance your investments and your daily economy. We will focus completely on how you can make more successful investments. The first thing we are going to talk about is how to choose a good broker. You should start by learning more about different brokers.
Read our broker reviews
There is a lot you should think about when choosing a broker. You should never choose a broker based on the recommendation of a website like ours, a friend or anyone else. You should always make your own informed decision. Your trading style and banking preferences will have a large impact on which broker you should choose. The broker that is best for me might not be the best broker that is best for you.
Make a mental list, or a written list, of everything that you want to see in your ideal broker. List the things that are absolutely necessary at the top of the list and things that are a plus but not that important at the bottom. Now that you know what you want you are ready to find a broker, or several brokers, that offers you everything you want. Sometimes you might need to keep accounts with more than just one broker to be able to get the service that you want. This is often the case if you want to be able to trade with some more exotic financial instruments such as digital options or CFD:s as well as more common instruments such as regular stocks.
Here are some things you should always consider when you make a list to help you choose a broker.
- What financial instruments do you want to trade with?
- Which countries do you want to be able to invest in? On which markets?
- How much money are you going to trade with? You should look for a broker that has a pricing structure that is affordable for the size trades you want to make.
- Do you want to have access to a human broker or is online trading enough?
- Do you want any investing tools or software included in the price?
- Do you need real-time information?
- Do you want to have access to an adviser or wealth manager?
- Do you want the broker to offer credit? If so, on what types of financial assets. How high do you want to be able to leverage yourself? IE how much do you want to be able to borrow.
- Do you want to be able to use your investments as collateral for a loan? IE do you want to be able to borrow money that you can withdraw and use for other purchases outside the broker. Some brokers offer very favourable loans that can be used to buy your next car or house using your stock as security.
- How do you want to deposit and withdraw money?
- Is it important to be able to withdraw money quickly?
- Do you want free withdrawals?
- Do you want the broker to be located within a certain jurisdiction?
- Do you want to be able to trade on your smartphone?
- Is there any other thing you need?
It is important to remember that most brokers have several different account types that you can register for. You have to consider all these different accounts in your search for the right broker. If you only look at one of their account, the one they promote most heavily, you might miss the perfect account for you.
Once you have chosen a broker you should always verify that they have a good reputation online before you register and deposit money. It is also a good idea to verify their brokerage license. This way you can prevent being tricked into depositing your money into a scam site. Scam sites are rare but do exist.
Once you have money in your account you are ready to invest.
Common mistakes to avoid
Below I want to address some of the most common mistakes that inexperienced and more experienced traders commit.
You should always diversify your investments. This helps prevent you take a big loss from one unpredictable event. Many investors believe that investing in stocks of various kinds means that they are diversified. It does not. If you want to diversify in the stock market you need to invest in at least 20-30 different companies in different industries. Lower brokerage fees have made it possible to buy just a few shares at the time and you can now be invested in a large number of companies even if you only have a small amount of money to invest.
To be truly diversified you should spread your investments not only over different stocks in different industries but also over other types of financial instruments. To be truly diversified you should build a portfolio that contains stocks, bonds, options, currencies and commodities. The more diversified you are the more protected you will be from the negative effect of random events.
Invest 90% or more of your investments in lower-risk investments. Use 10% or less for high-risk investments and speculative trading. When I say speculative trading I am referring to things like forex, CFD and binary options trading.
- CFD trading is banned in the US.
- Binary options trading is legal but is best avoided due to the fact that very few traders make any money.
- Forex trading is legal. The risk level of forex trading depends on how high leverage you use when trading. Forex trading on margin can be very high risk but forex trading does not need to be high risk provided you choose to trade using low or no leverage.
Keep the money you might need in liquid assets
You should always keep a percentage of your investments in assets that can be quickly liquidated without any penalty. A good example of such assets includes popular stocks such as Apple and Google. If you have all your money invested in investments with poor liquidity you might not be able to withdraw money when you need to. This might force you to take expensive loans to cover costs you normally should have been able to cover yourself.
Never invest money you are going to need soon
It can be very tempting to invest money that you are not going to need for a couple of months in the hope of earning a profit. This is not a good idea if this is money you really need. It is true that you can make a profit but you might also lose money and be unable to meet your future obligations. Money that you need in the short term should never be invested. It is better to deposit the money in a bank account where the money is safe and earns a small interest.
You can ignore this advice if you have large investments and are able to raise the money you need regardless of the outcome of the investment. In this situation, it can be a good idea to put the money to work as soon as possible.
Choose a suitable risk level
It is very easy to get tempted by the promise of quick riches and invest in penny stock, binary options and other high-risk investments. Do not fall for this temptation. It is true that some high-risk investments reward their investors handsomely. It is however also true that most high-risk investments end up losing their investor money. For every success story, you hear there will be ten guys that lost everything that you never heard about.
Design a portfolio that contains the right amount of risk for someone in your position in life. The portfolio can contain a small number of high-risk investments but you should never use the stock markets to gamble. If you want to do that you can head to the casino and have more fun while losing your money.