How to Use Research to Help You Trade

Online trading has become incredibly popular in recent years, largely thanks to the advent of online brokers, which offer extensive access to the global markets to anyone with an internet connection. Now there are millions of traders who try to make a living from trading on a daily basis, in a number of different markets.

Not all of them are successful, however, which could be down to a number of factors, one of which is the unpredictability of the markets. Here are some of the ways you can use research to maximise trading success.  

Follow the News

The news is the most obvious and reliable source of information for traders worldwide. It is usually the first port of call for those looking to see what could be affecting market behaviour, and very often contains information on the markets themselves.

Whilst most brokers offer tools such as an economic calendar to help you stay updated with global political and economic events, the news can provide extra details and potentially be more effective in giving you a comprehensive view of how multiple events might affect the markets. Just make sure the news source is reliable and accurate, as you do not want to make trading decisions based on inaccurate information.

Look at Past Events

One of the most effective ways of judging how a market will be affected by news events is to see how it has been affected in the past by similar events. You could, for instance, look at how the Brexit referendum in 2016 caused the pound to plummet to a 31 year low (which would be particularly helpful when trading forex).

Bear in mind, however, that market behaviours can change, and so the same or similar event might not have the same effect on the market twice. It is still helpful to gauge the significance of the event and its potential implications, but don’t use past events as guarantees of future behaviour.  

Apply Your Knowledge

Once you have done some comprehensive research around the market you are investing in, you can apply it to your trading. When investing in stocks and shares, for instance, you may have looked at a company’s performance statistics to make an informed decision on how their shares may rise/fall in value.

Whilst you can only make predictions, the fact that you have done ample amounts of research will give you a better an understanding of the market’s behaviour, and maximise your chances of making a successful investment.   

Be Cautious

Do not take anything for granted when it comes to trading, as markets can be unpredictable and volatile. Whilst it is important to make as informed trades as possible, it is usually unwise to pile all your money into one investment, no matter how sure you are of its potential profitability.

With all this in mind, make sure you do plenty of quality research as part of your trading routine, examining the finer market details as well as the bigger picture. Once this skill is mastered, you should see that your predictions become more reliable and informed, and hopefully more successful in the long run.