Plus500 trading tutorial
In this article you will learn how to trade in a profitable way in 30 minutes. We will start by introducing the best broker for new traders: Plus500. We will teach you how the software works and you will learn how to open a position. After that we will discuss some important information for you to be as successful as possible.
In this tutorial
- Part 1: Plus500 software: Learn how to trade with the Plus500 software.
- Part 2: Market conditions: Learn how to determine the trend and use horizontal price levels.
- Part 3: Price action: Learn how to determine the market direction.
Opening an account
In this tutorial, we use the software of Plus500. Plus500 is one of the better brokers; especially for new traders the software is very good as it is simple to use and available in more than 60 countries and 32 languages. Plus500 offers a full service in your language and your currency. If you open an account at Plus500 you will receive an unlimited demo account to try and practice with real money, without having to make a deposit first. Moreover, the demo mode lets you practice as much as you want!
- Practice free and unlimited with a demo account
- Trade shares from companies across the world
- Open an account quickly and easily within 3 minutes
Click here to open an account with Plus500>> (Risk warning: “76.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.”)*
Required for this tutorial: download the software first and then use it in combination with this tutorial.
Part 1: Plus 500 software
Plus 500: The software explained
The initial screen of Plus500 directly provides a clear overview of the possibilities. At (1) you can switch between trade, where you can open positions; open positions, which are trades that you have already opened; closed positions, where you can see your past trades with their corresponding profits or losses; and orders, where you can view your pending orders.
At (2) the various financial instruments you can trade with are displayed. In addition to shares, you can also trade commodities, indices, ETFs, and currencies with Plus500. In the left bottom (3) you can see the money that is available in your account as well as your current profits or losses.
On the main display (4) you can choose a particular instrument (after having selected a category) and the price movements of that particular instrument will be displayed in a graph (5). These are the main parts of the Plus500 software that you will be using most, especially in the beginning.
Opening a position
If you want to trade with Plus500 you will need to open a CFD position in either a stock, commodity, index or forex. Only when you close a position the actual profit or loss is made: in the meantime everything and anything could happen!
There are two options within the Plus500 software: either buy or sell. When you buy (long) the value of your CFD contract increases if the price rises and when you sell (short) the value of your CFD contract increases if the price falls. So whatever direction the market is moving, you can always trade profitably: even in bad economic times!
Closing a position
At Plus500 you can trade with a larger amount than you actually have in your account: this is due to a so-called leverage. For example, with a leverage of one to thirty (1:30) you can open a position which is thirty times greater than the amount on your account. The initial margin indicates how much money should still be in your account to open the position and the maintenance margin indicates how much money you need to keep the position open. Once a position is opened, the actual results are shown next to profit/loss. You can manually close the position by clicking on “close position”.
More control over your trades
When you open a position you can make use of a stop loss and a take profit. With a stop loss, you can choose a certain price level at which you automatically take your loss; with a take profit you can choose a certain price level at which you automatically take your profit. Always set a stop loss: that way you do not constantly have to keep an eye on the position and you always know what the maximum loss is on that particular trade!
If you want to trade profitably it is wise to set the take profit twice as high as the stop loss. For example: you place a stop loss at a loss of 10 euros and a take profit at a profit of 20 euros you need to be right less than 50% of your trades: handling risks is essential if you want to make a lot of money with trading.
Getting started with orders
A very useful feature within the Plus500 software is the ability to open an order. An order allows you to open a position (long or short) once a certain price is reached. The use of orders is very convenient; this way you can place an order after you have completed your analysis, and when you combine this with a stop loss and optionally a take profit you do no longer have to watch this trade.
Some general recommendations
- Deposit a small amount of money right away: that way you get used to trading with real money.
- Practice and keep track of what works and what does not work: learn from your mistakes.
- Always use a stop loss: that way you never lose more than a certain fraction of your account.
- Do not put too much money in one trade: only risk a small percentage.
Part 2: Market conditions and horizontal price levels
Now that you understand how the Plus500 software works, we can discuss the timing of trading. In order to be a successful trader, two things are important: you need to recognize trades (1) that have a favorable profit / risk ratio (2). In part two, we will examine how best to deal with different market conditions and discuss how to recognize those potential trades with a high probability of success.
Study market situation
Each timeframe shows a certain market situation. Have a look at a slightly larger timeframe (e.g. day) to determine the general direction of the market: there are basically three possibilities:
• Uptrend: the price is mainly moving upward; you look for a good time to buy.
• Downtrend: the price is mainly moving downward; you look for a good time to sell.
• Consolidation: the price moves between two points; there is temporarily no clear trend.
The trend is your friend
When the market shows a clear trend, it is important to trade in the direction of the trend. So when you open the Plus500 software and you see the trend is upwards you mainly buy (go long), if the trend is downwards you mainly sell (go short). It is important not to randomly open a position!
It is better to look for a technical reason to open a position at certain point. When a clear uptrend or downtrend is visible the price will first move in the direction of the trend, called an impulse, to subsequently move back a little, the retracement.
The highest success rate can be obtained when we open a position after the retracement. So, in an uptrend we buy after a temporary downward movement and in a downtrend we buy after a temporary movement upwards. This way of trading can be maintained until there is a break in the trend: in this case a new trend is formed in the opposite direction.
Recognize horizontal levels
But how can you actually time a trade? For this it is wise to look for horizontal price levels. A horizontal level is a certain a level against which the price bounces several times, but where the price does not seem to go through. A lower horizontal level in an uptrend is called a support level and a higher horizontal level in a downtrend is called a resistance level.
By opening a position at a horizontal level the chances of a successful trade can be increased: since almost everyone expects the price to move in a particular direction at this level, most of the time it does! Horizontal levels that have been tested often are stronger and more reliable than horizontal levels that have only been touched a few times.
It often happens that a horizontal level changes role after a breakthrough. A resistance level can become a support level or the other war around: this can be very useful since you can then see whether new action is taking place if the price touches this level again.
Special situation: consolidation
In addition to the uptrend and downtrend a consolidation can occur as well: in case of a consolidation the price moves mainly between two horizontal levels. In a consolidation one should buy at the lower horizontal levels and sell at the higher horizontal levels.
Part 3: price action and the right timing
If you want to achieve really good results you will need confluency: a confluence of several factors. We have already discussed the importance of the market situation and you have learned what horizontal levels are and how to use them. In order to spot perfect investment is wise to use price action. In this third and final part of this tutorial we look at how to take advantage of price action within Plus500.
Working with candlesticks
A line within a chart provides little information: therefore experienced traders prefer candlesticks. Candlesticks provide the opportunity to determine price action: price action gives an indication of possible next movements. Within the Plus500 software it is easy to switch to candlesticks by pressing the button below:
A candle consists of colored body and a line sticking out. The color of the body indicates whether there is a price increase or decrease: if the body is red the price at the end of the period was lower than at the beginning; if it is green the price at the end of the period was higher than at the beginning. The stick indicates what the range was within that period; what was the highest and what was the lowest price level in that period?
Candlesticks explained: clear trends
The high test / low test
To the left you see a high test; the high test is characterized by a long stick above the body (at least 2/3). A low test is exactly the opposite, the body is then above and the stick and directed downwards. The color does not matter with the high and the low test.
The high and low tests both are very strong price signals; they reflect the shift from buyers to sellers and vice verca. The price is strongly pushed upwards in case of a high test: the buyers however, were too weak and the price has fallen back again. This is a strong sell signal. Conversely, the low test is a strong buy signal.
Train tracks and twin towers
Train tracks consist of two (almost) identical bars next to each other: first a green then a red. Twin towers are exactly the opposite: a red bar is followed by an identical green bar. This combination can be seen as a combined high or low test, the two bars together constitute a failed breakthrough.
Train tracks are a strong sell signal; After all, the sellers overpowered the buyers. As the twin towers are precisely the opposite, they are a strong buy signal.
Bullish / bearish engulfing bar
The bullish engulfing bar is a red (negative) bar followed by a green (positive) bar that engulfs the previous bar: it opens lower and closes higher. After the initial decrease in the price it has fallen even further (second bar opens lower): from here however, the buyers took over and the bar closes above the previous day’s high. Bullish engulfing is a strong buy signal.
Conversely, a bearish engulfing bar is a strong sell signal. The price increase is followed by a stronger price decrease in which both the high and the low of the previous bar are exceeded.
Candles explained: indecisiveness
The inside bars are a strong indication of indecisiveness. The inside bar fits into the previous bar: there is no clear direction. The double inside bars (see image) are even stronger; hereby the third bar fits into the second bar. After the double inside bars a strong movement up or down may be expected.
The doji bar also indicates a high level of indecisiveness: the doji bar is almost symmetric in the middle whereas the price has gone up as much as it has gone down. Ultimately, not much has happened during that period.
Get started with trading!
You now know already a lot more than many other beginning traders. Remember that trading is not about knowledge or intelligence, it’s about managing and dealing with risks. Therefore, always make sure that gain more on a winning trade than you lose on a losing trade.
Besides, it is important to remember that you should look for a gathering of certain factors. Got a good price action on a strong horizontal level? Take a position! For the rest, accept your losses; you cannot always win, prices cannot be predicted with 100% certainty. Therefore, always use a stop loss!
Do you want to improve your trading skills? Then it’s time to start practicing! Did you open an account already?
Risk warning: “76.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.”