Trading Guidelines
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[HOW TO SELECT THE RIGHT BROKER?]
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You are all set to embark on a trading journey with an initial capital that is a substantial portion of your life time savings. You believe it couldn’t have gotten any better, now that you have a broker who is willing to pay you a sign on bonus of $100 for opening a trading account with them.
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What an amazing start!
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You are now maneuvering through complex minefields of trading on a daily basis. After researching through news, events, earning reports, complex technical indicators, analysis for many weeks which has taken important time away from your family & friends, fighting your own internal bias & emotions, you finally converge on a few trades & set the ball rolling.
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In a few days, you experience that your screens freeze during important trading hours/news releases. Your market order executes many minutes after it is placed and the actual entry point is many pips away from your intended entry.
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You frantically call the broker for help. They tell you that it is normal for trading to be suspended on account of key events, due to heavy traffic & that the order executes after a few minutes. This happens consistently for many weeks & you learn to live with it. This is now a NEW NORMAL for you.
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A positional [Few weeks] trade opportunity that you had identified is doing extremely well. Your hard work & analysis has paid off. You are super excited about the gains that you see on the platform screen. You close the position & wait for your account statement to quickly validate these gains. The statement leaves you stunned.
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Your broker has charged you various fees – Spreads, Commission, overnight charges, fees for margins/leverage & many other hidden fees. The trade was actually a LOSS trade. All the gains plus some of your principal capital has actually eroded. You are pissed off with your broker & would like to withdraw funds. But, the withdrawal charges are absurd, have long hold time & requires additional identification.
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You have just been SCAMMED.
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Suspending trading during important events, trading unfairly against customer orders, unscrupulous commissions on trades & additional credit, making withdrawals convoluted are the most popular methods that many brokers use to rip-off traders, both new & existing. While new traders fall to this trap because of their novice status, existing traders are victims as their confidence turns to complacency.
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Ways to address this matter
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1. Reputed broker:- Detailed online reviews are available for all brokers. Important to vet them through reviews & by discussing with some of your peers who may be their customers.
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2. Discounted broker:- Look for discounted brokers who charge a small FLAT fee per trade or a fee that is a miniscule percentage of your trade.
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3. Experience first:- Learn the fee structure with very small trades first. Double check with your broker that the fees shall remain flat even if you were to increase the size of your lots. Small trades will also help you understand if orders freeze during important trading hours.
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4. Only LIMIT orders:- Never place market orders with your broker that allows them a choice of selecting the price. Only place LIMIT orders.
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5. No Credit & Extra leverage: DO NOT TRADE ON CREDIT/MARGIN if you are a novice trader. THIS IS THE FOREMOST reason for disproportionate fees. Credit converts many profitable trades to losses.
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6. Trading technique: Adopt a trading technique which does not require a large initial capital. If one is trading strictly on the below rules, why should one need a large account size to trade?
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a. 1% rule – Not risking more than 1% of your trading equity per trade
b. Tight Stop Loss based Entry Points – Wait for the right entry points near key support/resistances. If they do not work out, embrace the stop loss & the small risk.
c. No averaging losses or cost averaging
d. No hedging
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Disclaimer:- Arnam Capital does not endorse any Broker nor recommends the services of a broker or other intermediary to their clients. Arnam Capital does not receive any consideration by way of remuneration or compensation or in any other form whatsoever from any broker or intermediary.
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