Everything you need to know To Start Trading
Masari Capital would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.
- Why Get Into The Trading World?
- A Wanderer’s Guide to Trading
Why Get Into The Trading World?
Trading attracts millions of neophytes trying their luck at earning a little extra income and rounding up their wages – following the adage: make your money work for you. However, most of them don’t get what they came for and walk away with a few lessons learned and a couple of stories to tell. But they never realize that, no matter how novice, they really are simply potential unfulfilled. Mastering the basic skills needed to avoid the common disappointment will put you closer to the mark and tip the odds in your favor.
Just like any new skill, you first need to put in the effort and have the will to invest your time to learn. Therefore, instead of following a speculative approach, which has more lows than highs on most days, learn how to trade the markets with confidence. Here we compiled the most frequently asked questions on everything you need to know to start trading.
A Wanderer’s Guide to Trading
1. When should I consider getting into trading?
There is no one answer. You should consider trading if it feels right for you. But also, if you’re willing to invest in some risk. Here’s a short list of reasons why you would want to become a seasoned trader.
Small Start-up Capital:
Trading forex does not require a large initial investment. You can open a trading account and start trading with a small amount – or as much as you wish to spend.
The forex market is open 24 hours a day Monday to Friday. It literally is the best side job or hobby you can have, as you can make it work around your schedule and don’t need to quit your job for it. Also, you can trade from anywhere in the world. Trade while you travel, from the beach, your bed, while you wait to pick up the kids, anywhere, anytime.
There is a potential to make a lot of money – be it enough to round-up your monthly income, or enough to buy a yacht! If you trade wisely, you will profit.
The foreign exchange market is one of the most liquid financial markets in the world. It means the forex market has a large number of buyers and sellers. High liquidity means a low risk of price manipulation by a few big players.
Experience not required:
It’s usually very difficult to start a business without any know-how. However, it’s not the case with forex trading. It is open to anyone regardless of their experience and knowledge. Albeit, for better chances at success, it is highly recommended to study-up before jumping in.
2. How should I get started?
Start slowly. There is nothing like getting over-excited to start a project and finding out mid-way that you were not ready for it. So be the Turtle. And move forward slowly yet surely.
Most new traders start by doing research or taking up an online course. Some start by doing a thorough analysis of a company.
To avoid getting lost, we compiled a guide to get you started the right way. Take a look and feel free to personalize it.
Make a plan and stick to it
It can be emotionally draining to start investing. As you are not only putting in your money but you are also investing your energy and hope. No one likes to lose. Therefore it is easy to panic and pull out of the trade at the wrong time. Just as it is easy to get over-confident from what looks like a winning investment and also make the wrong move in the excitement.
That’s why it’s important to plan how much you want to invest, at what price, and determine how far you’re willing to let a stock fall before you get out. The right trade order will help you avoid any emotional response – such techniques include a stop-loss order to trigger a sale when a drop occurs to minimize loss.
In all cases, you can train yourself emotionally. Be present at the moment, and apply mindfulness practices to help you control your instincts.
Our tip: Plan for the risk – and loss – you are willing to take on.
Open a Trading Account
Choose an online stock broker – out of the many, go for the one that is most credible and has a user-friendly site. Even if you have a personal account, it is recommended to open another stock brokerage account. And now, get down and personal with the interface, use any available free trading tools and familiarize yourself with virtual trading.
Our tip: It is always a good idea to check reviews on several reference websites before you take the plunge and commit with a broker.
Learn to Read: A Market Crash Course
Get into the habit of reading. From financial articles to stock market books. Check out e-books, webinars, and tutorials. Anything you can get your hands on. Because there’s a wealth of information out there. Study up on the trends, historically, and current – market-wise – including ideas and concepts you don’t feel are particularly relevant at this time. Your market background will come in handy later on.
Start to follow the market every day in your spare time. Get up early and read about the overnight price action on foreign markets.
Our tip: Keep an eye on the news. Check out news sites regularly and subscribe to receive notifications.
Learn to Analyze
There is no way around it. You should study the basics of technical analysis. For a while, your bed-time reading will consist of price charts. Read company spreadsheets too, they will give you an edge over those who don’t take them into consideration. Basically, let the nerd inside you take over.
All that studying will give you experience with charts and bring you unequivocally to price prediction. Theoretically, securities can only go higher or lower, encouraging a long-side trade or a short sale. In reality, prices can do many other things, including going sideways or violently shifting in both directions, shaking out buyers and sellers.
Getting a grip on the time horizon becomes very important at this point. Prices move independently in the financial markets, at short term, intermediate-term, and long term intervals. And there are trends and ranges that dictate these shifts. Most trading opportunities will unfold through interactions between these time intervals. A now-classic example is buying the dip, with traders jumping into an uptrend when it sells off during a lower period.
Our tip: The best way to examine this three-dimensional playing field is to look at each security in three-time frames, starting with 60-minute, daily, and weekly charts.
3. How Can I Practice Trading?
Only one way to learn how to swim: get in the water. And to learn how to trade, you need to get your feet wet. Try virtual trading. This is a great solution to follow real-time market activities, make decisions based on your observations. It is the stock market simulator if you will. So get comfortable, and make as many trades as you can. Use different holding periods, mix up strategies, analyze the results you get, and write everything down in your trading diary to learn from your experiences.
So, when can you finally start trading with real money? It is very subjective, and you must be the one to decide to take the leap. Even a perfect simulation can never truly reflect reality. So don’t wait until you manage to trade for a win at every shot; because as a trader, you must learn to live with risk, fear, and wanting more. There is a strong psychological aspect you must be ready for. Beyond the technicalities of trading.
Our tip: If you can, find a mentor. Someone you trust, with a lot of experience in the field, to be your hands-on guide. He will give you constructive criticism to build your confidence and eventually develop your trading style.
4. How can I manage the risk and prosper?
And last, but definitely not least! Once you begin trading with real money, your primary concern is position and risk management. As you will surely learn in your journey, every position has a holding period and technical parameters that lead to profit and loss targets. Timely exits will become key for successful closings. However, handling risk does not always mean waiting for the right moment to exit the only position you have. Eventually, your aim is to manage many positions at the same time. We’re talking about managing risk for larger-scale operations. Think about the energy and constant awareness you put in for your one position and imagine holding 3 to 5 positions. Some moving in your favor, while others move in the opposite direction. That is why experience is necessary. Therefore take the time you need to learn all the aspects of trade management.
Our tip: start a daily journal to document your trades, the reasons behind taking a risk, holding periods, as well as profit and loss.
In a Nutshell…
Start your trading journey by learning more about the financial markets. Read charts, watch price actions, test yourself by building strategies based on your observations. Analyze results and optimize continuously. You may even choose to take a short online course or follow a webinar. Education is essential. We won’t say it enough.
Get into the psychology of markets and go deeper into understanding risk management.
Only then will you finally be ready for take-off into your trading journey.