There is a misconception about trading and investing that you can only learn about it ‘on the job’: that is, risking your capital in the market straight away. After all, the lure of making passive income or having a second revenue stream is very exciting indeed.
The reality could not be more different, and you can learn so much about trading without parting with a single penny. Once your ‘education’ is complete, then and only then should you start to invest your hard-earned money in the assets of your choice.
So, if you are a newcomer to trading and want to know how to get started, follow these simple tips prior to making any payments whatsoever. You can thank us later!
Know Your Broker
If you were to buy a new TV, there would be many considerations to ensure you get the right spec for your needs. But ultimately, you would only buy from a reputable seller.
If you needed to purchase a new car, you would only shake hands on a deal with a salesperson or garage that has a reputation for reliability and quality.
With trading and investing, the same rule applies. The truth is that not all brokers are created equally, and while some deliver a tremendous user experience, others leave a lot to be desired and can put your investment capital at risk.
There are many different factors to consider in a trading broker, from the security of their site and the quality of software offered to financial protection, fees, and customer support provision.
Happily, there are sites like asktraders.com that compile reviews and have all the information you need to make a more informed decision.
Learn the Ropes
Once you have decided which broker to use, don’t just dive in headfirst by making a deposit and buying shares or foreign currency.
First, get to know the platform. How do you access customer support? What payment methods are accepted? Is there an education/FAQ section of the site? This can all be useful information further down the line.
Your trading broker will, in the vast majority of cases, offer you access to a software package like MetaTrader. Again, spend time getting used to the different options available, from one-click trading to automated tools like Stop/Loss and Take Profit.
Once you are familiar with the broker and their software, then you can start to think about making some trades.
Of course, knowing what to trade – and when – is a key part of any success you might have.
For the best insight, we fully recommend that you educate yourself on the basics of technical analysis. From reading charts and patterns to identifying market-moving indicators, understanding when and why the price of an asset is changing – or will change – is imperative in pre-empting what might happen next.
There are stacks of resources online about technical analysis, from beginners’ guides and walkthrough videos to tips and tricks for more advanced traders. You can find this wealth of information, much of it free of charge no less, in the usual online hotspots like Google and YouTube.
And do you remember books? You know, those things made of paper that you can read from? There are many excellent investing books you can learn from.
Do Your Research
One of the keys to successful trading is timing – that is, ensuring that your buy or sell position is executed at the opportune time for maximising profit.
If you can buy shares at a low price, or just prior to a rise, then clearly you are in an advantageous position. And if you can sell at the peak price – or just prior to a confidence-shaking earnings report or news story – then you will be able to protect your position.
Of course, information is gold dust in any form of investing, and so it is imperative that you arm yourself with as much of it as possible.
Make sure you follow as many breaking news sources as you can, be it on social media or via your own curated Google newsfeed. Give credence to the opinions of experts – those that tangibly have connections in high places and who can influence the markets.
As mentioned, acting fast is rule number one of successful trading, especially when using more hands-on strategies like scalping and swing trading.
Earlier in this guide, we mentioned the importance of fully vetting any broker that you intend to partner with.
One of the aspects that is crucial to this is the presence of a demo account facility, which will grant you access to real-world markets but with simulated cash – thus, you can practice your trades without risking any of your own capital.
The best brokers will offer you an unlimited demo account, with no limits on the time you can use it or how much theoretical money you can trade with. This is an invaluable free learning tool.
If you adopt all the steps outlined in this article, we have full confidence that you can go on to become a successful trader.