Millions of beginners try their hand at the trading market every year. However, most of them leave a little poorer and much wiser, never reaching their full potential. Most losers have one thing in common – they haven’t mastered the basic skills needed to tip the odds in their favor.
However, if you take enough time to get to know them, they may be well on their way to increase their chances of success.
World markets attract speculative capital like moths, and most people throw money into securities without understanding why prices fluctuate.
Instead, they chase the latest tips, make binary bets, and sit at the guru’s feet, allowing them to make buy and sell decisions that make no sense.
The best way is to learn how to trade the markets with skill and authority is to start with a self-examination, which will carefully examine your relationship with money.
- Do you see life as a struggle for every dollar you make?
- Do you believe that personal magnetism will attract market wealth to you in the same way as in other life’s quest?
- Is it more ominous to regularly lose money as a result of different activities and hope that the financial markets will treat you more kindly?
Whatever your belief system is, the market is likely to strengthen this inner view over and over again through profit and loss.
Hard work and charisma support financial success, but losers in other areas of life are often likely to turn into losers in the area of trading. Do worry if it looks like you. Instead, use the self-help route and learn about the relationship between money and self-esteem.
Once you are clear in your mind, you can start learning how to trade by starting with these five basic steps.
Open A Trading Account
Sorry if we seem to be saying something that may be obvious, however, you never know (remember the guy that set up his new computer – except disconnect it). Find a reputable online stock broker and open a broker account.
Even if you have a personal account, it’s a good idea to keep a professional trading account separate.
Familiarize yourself with the account interface and benefit from free trading tools and research offered exclusively to clients.
Learn To Read: A Market Crash Course
Financial items, books on the stock market, and tutorials on the site. A tremendous amount of information, most of it inexpensive.
However, do not focus too narrowly on one single aspect of the trading game. Instead, study everything related to the market, including ideas and concepts that you think are not particularly relevant at this time.
The trading game starts a journey that often ends at a destination that is not expected at the start line. Your broad and detailed trading background will come in handy over and over again, even if you think you know exactly where you are going.
Start monitoring the market every day in your spare time. Get up early and read about nightly price actions on foreign markets.
Note: A couple of decades ago, U.S. traders didn’t have to monitor global markets, but that changed with the rapid growth of electronic trading and derivatives that connect stock, forex, and bond markets around the world.
For new investors, news sites such as Yahoo Finance, Google Finance, and CBS MoneyWatch are a great resource.
For more sophisticated coverage, you should look no further than The Wall Street Journal and Bloomberg.
Learn To Analyze
Learn the basics of technical analysis and look at price charts, thousands of them, in all time frames.
You might think fundamental analysis offers a better way to make a profit because it tracks growth curves and revenue streams. Still, traders live and die from price action, which is in sharp contrast to fundamental indicators.
Photo by Adam Nowakowski
Please do not stop reading companies’ spreadsheets because they offer an advantage over those who ignore them. However, they will not help you survive your first year as a trader.
Your experience with charting and technical analysis now brings you to the magical field of price forecasting. In theory, securities can only go up or down, encouraging long trading or short selling.
Prices can do many other things, including shredding to the side for weeks at a time, or they can whip brutally in both directions, shaking buyers and sellers.
At this point, the time horizon becomes extremely important. Financial market trends and trading ranges with fractal properties, which generate independent price movements in the short, medium, and long term intervals.
It means that a market or index can simultaneously cut out a long-term uptrend, intermediate downtrend, and short-term trading range. Instead of complicating the forecasting, most trading opportunities will be revealed through the interaction between these time intervals.
Buying a drop is a classic example where traders jump into a strong uptrend when they sell in a lower period.
The best way to explore this three-dimensional playing field is to look at each market in three-time frames, starting with the 60-minute, daily, and weekly charts.
It’s time to get your feet wet without giving up your trading share. Paper trading, so-called virtual trading, offers an ideal solution that allows the novice to follow market actions in real-time, making buying and selling decisions that form the outline of a theoretical report on the work done.
Usually, this includes the use of a stock market simulator, which has the look and feel of the actual work of the stock exchange.
One should make a lot of transactions using different holding periods and strategies and then analyze the results for apparent shortcomings.
Many sites have a free stock market game, and many brokers also allow clients to engage in trading with their real money entry systems.
IT has the added advantage of training the software so that you do not press the wrong buttons when you play with family money.
So, when do you make the switch to trading with real money? There is no perfect answer because simulated trading has a drawback that is likely to manifest itself whenever you start to trade for real, even if your paper results look excellent.
Traders should coexist peacefully with two emotions – greed and fear. The trading paper does not include these emotions, which can only be experienced at real profit and loss. This psychological aspect pushes more newcomers out of the game than bad decision making.
As a new trader, you need to be aware of this problem and solve the remaining issues with money and self-esteem.
Other Ways To Learn And Practice Trading
Even though experience can be a great teacher, do not forget about additional education when you continue your trading career.
Whether it’s online or face-to-face training, it can be useful, and you can find them at different levels – from a beginner (with advice on how to analyze the above mentioned analytical charts, for example) to a professional.
More specialized seminars, often conducted by a professional trader, can provide valuable insights into the market in general and specific investment strategies. Most of them are dedicated to a certain type of asset, a particular aspect of the market, or a trading technique.
Some of them may be academic, while others are more like seminars where you actively take positions, test entry and exit strategies, and other exercises (often with a simulator).
Paying for research and analysis can be educational as well as useful. Some investors may find it more rewarding to analyze or observe market professionals than trying to apply newly learned lessons on their own.
There are many sites on the Internet with paid subscriptions: Two reputable services include Investors.com and Morningstar.
It is also useful to get a hands-on mentor who will guide you, critique your technique, and give you advice. If you don’t know it, you can buy it. Many online trading schools offer mentoring as part of their continuing education programs.
You can also have a look at broker reviews to find the best help and advice possible.
Manage And Prosper
Once you have launched the system with real money, you need to address positioning and risk management issues. Each position has a retention period and technical parameters that are conducive to achieving the profit and loss goals that require you to exit on time when you reach them.
Now let’s look at the mental and logistical requirements when you hold three to five positions simultaneously, with some positions moving in your favor. In contrast, others are charged in the opposite direction. Fortunately, there is plenty of time to learn all aspects of trading management until you overload yourself with too much information.
If you have not already done so, now is the time to start a daily log that captures all your trades, including the reasons for risk, as well as retention periods and final profit or loss figures.
This diary of events and observations lays the foundation for trading that will end your novice status and allow you to withdraw money from the market consistently.
The Bottom Line
Start your trading journey by studying the financial markets in-depth, then read the charts and follow the price actions by building strategies based on your observations.
Test these strategies by trading on paper, analyzing the results, and making continuous adjustments.
Then finish the first phase of your journey with money risk, which will force you to deal with trading management and market psychology. However, remember to make sure that you trade safely.