15 Things You Need to Know Before You Begin Trading
Stock trading for dummies is this a wide issue that I could really create an epic book on the topic.
But after all you’re browsing for a dummies informative article, too a lot of detail is most likely over kill.
This guide is a gate way to trading. You may have sufficient info to know the best places to really go deeper, however insufficient to begin placing trades. I provides links to additional tools all over the internet and articles on Theforexassassin that’ll aid with this particular travel.
In this informative article we’ll insure the 15 things that you definitely need to understand and consider before diving in to the world of trading.
So, let’s move right ahead and obtain going. For every department, I will list a variety of sub sections that you’ll be able to utilize as an alternative tree to get the correct replies to fulfill your wants.
- Create a Trading Plan
- Day Trading
- Swing Trading/Investing
- Day Trading
- Day Trading
- Swing Trading/Investing
#1 How Often Do You Plan on Trading
How Many Trades Are You Planning on Placing Per Week
If you’re considering afternoon trading, then meaning over just 3 roundtrip trades each week, you need $25,000 dollars money on your accounts. When you haven’t ever been aware about the expression roundtrip trade, this methods to start and close a posture. Aday trading accounts additionally contains 4 times purchasing power inside the US. This usually means that you may invest upto $100,000 together with your original investment of $25,000.
This can be frustrated if you might be firs starting outside, since you would like to obtain data out of the trades and also we neglect ‘t to blow up the account early on.
If you are looking to place trades infrequently, meaning less than 3 per week, then a standard account will do. This means you are trading with only the cash you have on hand and are not looking to go short.
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Which leads me to my next question.
Will You Only Go Long?
Going long means purchasing a share with the expectation it appreciates in cost and you make a benefit. However, shorting is selling a share without ownership and you benefit as the share goes lower.
To go short, you will need a margin account to borrow share from your broker to sell the share short. This is called a standard margin account and allows you to trade twice the amount of cash you have on hand.
So, what will it be, day trading margin (4 times purchasing power), margin account (2 times purchasing power), or a standard account (cash only)?
#2 Technicals or Fundamentals
Next you need to decide if you are going to base your trading decisions on technicals (share charts) or fundamentals (financial reports).
Full disclosure, I am a technical trader but there is more than one way to make money in the marketplace.
You can try doing both, but these methods at times are at odds with one another and could trigger more confusion. So, my recommendation to you is that you pick one method to master before placing a trade.
If you like reviewing numbers and crunching spreadsheets, fundamental analysis is likely a better method for your working style.
If you consider yourself a visual learner and are good at recognizing patterns, technical analysis is likely your best bet.
Regardless of which method you land on, just know that neither one is perfect or has the ability to provide you a magic bullet for the marketplace. You will need to put in the hard work of analyzing each opportunity, proper money management and sticking to your trading plan to reap positive results.
#3 You Need A Trading Strategy
What types of securities will you trade? Stocks, cryptocurrencies, options, futures? This article is centered around share trading for dummies obviously, but once you start trading other product types will be made available to you.
How many trades will you place per day or month?
Where do you place your stops? What are your benefit targets? How will you pay yourself as you make money in the marketplace?
What cost range will you trade? Are you open to trading penny assets?
How a lot of volatility is right for your risk profile?
These are all the questions you need to ask yourself as you build out your program.
Building out your trading program is by far the hardest part of kicking off your trading activity. My recommendation to you is you sit down and write everything out.
Create a Trading Plan
This will generate a written trading plan for you. Think of this trading plan as a business plan.
Trading is no different than any other business. At the end of the day, you need a plan for how you plan on making money in the marketplace.
#4 You Need to Open a Brokerage Account
You are ready to trade, but you need a place to enter your trades.
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If day trading, you want to find a brokerage firm with awesome execution capabilities and low commissions. If you are trading with a small amount of money, high commissions could make the difference in the middle you finishing up or down for the month.
You likely want to go with a broker that will allow a tiered commission structure which offers competitive pricing as the volume of trades you make increases.
Trade execution is always important, but it’s not the end of the world if you plan on swing trading or long-term investing. When looking for a brokerage firm, you want to focus on low flat rate commissions.
There are literally dozens of brokerage firms you can choose from, but don’t even allow the range of choices encircle you.
You always have the option to move capital from 1 institution to the next with just a tiny newspaper job. It’s perhaps not exactly like opening up a 30-year mortgage.
Number 5 Placing Trades
There are over a dozen kind of requests you can set. Nevertheless, in this essay we’re simply covering the fundamentals. Below will be the principal sequence types you want to find out of if purchasing:
- Market Order – puts a order to do at the best bid or ask cost. This could be the quickest method that you enter/exit a posture, however, your entrance cost isn’t set.
- Limit Order- you place the cost you’re prepared to perform your purchase. In case the cost is struck and also there’s enough trade volume, then your order will activate.
- Stop Order – that really is an arrangement to depart a trade once it’s gone by way of a predetermined quantity.
- Trailing Stop Order – this arrangement follows your winning standing with a predetermined percentage or benefit level. This ensures you procure your own benefits since the marketplace rewards you to be directly on the trade.
The subsequent thing I imagine you’d have is that which orders if you employ when trading?
This may mostly rely on your own strategy. Limit orders would be my private go-to, because marketplace requests could throw away my benefit margins on account of this not known entry/exit cost I shall receive on the trade.
Stop orders are still an absolute must since this frees one to a spot where you state the trade isn’t functioning. If you neglect ‘t set boundaries for what is acceptable, you are open to everything.
#6 Controlling Your Emotions
When you before all else start trading, you will go through an array of emotions. These emotions will range from fear, superiority, self-doubt, pain. . .and this is all before lunch.
You will need to find ways to manage these emotions, so you are always trading in the moment.
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Traders do everything from exercising to sitting in complete silence when trading in attempts to control their emotions.
The method I have found that will keep you as close to peak performance as possible is meditation. I personally meditate for 10 minutes before the marketplace opens to help me find my center and erase whatever thoughts are floating around in my head.
#7 Get a Mentor
This is something I never did, which has resulted in my trading journey taking probably 10 times longer than it needed to.
Now, this mentor needs to be someone that has a proven track record trading and are not in it to just sell you a course. You can find mentors by following the top traders on StockTwits, speaking to other traders or doing a search on the web.
Do not consume yourself with becoming an exact replica of these seasoned vets, but rather pull from them the key essentials of what makes a successful trader.
#8 Trading Equipment
If you are day trading, you will need a more powerful machine and will want to consider dual monitors to track the action. A high-speed internet connection is also required, and you may want to have a backup internet connection to prevent any unexpected outages.
Now that cell phone carriers offer hot spots, having a backup connection is extremely affordable.
You can likely use your existing home laptop or desktop machine. You can even consider investing using mobile apps as every tick is of little consequence and you can trade on the go.
#9 Stock Trading for Dummies Goals
Stock Trading Goals
What are you looking to accomplish on a quarterly or annual basis? Are you trading for additional income or is this your next career opportunity?
These are the types of questions you need to ask yourself before you start trading.
I will caution you that whatever goals you before all else set, cut them in half so that they are obtainable. If you make goals that become tough to reach, you may end up taking these frustrations out in the marketplace, which is not a good thing for your bottom line.
#10 Trading Performance
Measuring your performance is key. You will need to monitor your winning and losing percentages and average benefits per trade.
You will need to be methodical about your numbers. The equal way a small business owner knows all their numbers, you also need to know everything about your trading business.
The key point to remember is that the only performance you need to worry about is your own. Do not start counting another trader’s money or winning percentage.
Trading is about bringing out the best you and not about stacking your results up against any other trader.
The only person you are competing against is yourself.
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Knowing your numbers is half the battle. You also need to know what you were thinking and your overall mental state at the time you made the trade.
You will want to define the type of program you used during the trade. What you saw that made you open the position. What you did right while in the trade and what you did defame.
Document how well you were able to stick to your trading rules.
This process of journaling and trade review will help you identify flaws in your trading game before these issues materialize in your trading results.
#12 Treat Your Portfolio Like Your Grandmother’s Savings
This is a statement I learned from a mentor during my consulting days.
You must look at your account as if your grandmother on fixed income has entrusted you with her financial future.
Start slow and focus on steady returns. When trading, your capital is your blood source.
You are out of the game once your account prints 0.
#13 Money Management
This is probably the most important item to consider when starting out in trading. No matter how perfect your system, if you do not manage your money properly, your account will suffer.
You need to set a maximum amount of money you can lose per trade.
If you are day trading, you will want to have a set amount you can lose per day and per week before you stop trading.
Trading is a game of mental toughness and discipline.
We have built these money management triggers into the Theforexassassin platform, but most retail brokerage firms lack this capability to configure your account to shut off if you are in a slump. It’s not mandatory that your brokerage firm have this option, but you will partially need to have the discipline to honor these money management rules manually.
You need to put yourself in the position to make consistent money without the risk of a blowup trade that erases weeks or months of work in a flash.
#14 Times You Will Trade
I do not recommend trading all day. If you follow this blog, you know I trade in the morning and call it a day around 11.
There are few if any day traders that can make money all day. Even if you manage to enter this class of elite traders do you really want to sit in front of the computer all day?
Like day trading, swing trading also has peak times of year where the trading action is prevalent – quarterly earnings season.
Earnings season is when volume picks up and assets are constantly in play for about 3 weeks. This window reduces the work required on you to identify assets that could potentially move.
Just make sure you have some downtime baked into your trading program, so you are not always on. Remember, this is a marathon and not a sprint.
#15 Support from Family
If you are single and have complete control over your finances, this is not applicable to you.
However, if you are married or live with your loved one, you will need to make sure they are on board with your desire to trade.
This support comes in the form of giving the thumbs up for a portion of the family funds going towards your trading activity. Also, this person will need to provide you emotional support during low times and act as a reality check when things start to go well.
As a lot of as possible, you will need to keep your emotions in check. Remember they love you. . .not the marketplace.