How do you Start Trading?

How do you Start Trading?

We think of a trader as a more active investor. Instead of just checking the share movements over breakfast and working out where his various stocks have reached and whether he should be thinking of making a few changes to improve his investment income and consulting his broker for advice in that regard.   The investor thinks in the long term and keeps watch for significant uptrends in the market.  By contrast, the trader will be thinking short term -putting his money on the line when he attempts to outperform the market.

It doesn’t take a genius to realize that no one can just drop into that kind of activity and expect anything except a very rapid and chastening draining of funds and confidence.  The first answer therefore to the question posed in the title of this article is that you start trading very slowly, very cautiously and very carefully indeed.

It all starts with the mindset.  Treat it as a fun activity, not to be taken seriously and in no time at all the laughs will all be at your expense – you might feel like crying!   If you really want to succeed, it is absolutely imperative that you treat trading as a business and not a hobby. (Whether the business is full or part-time is irrelevant because the same rules still apply.)   The corollary from all this is that your absolute priority is to develop a strategic plan to cover your business and your manner of trading.  The sort of topics that should be contained in your plan should include your short and long-term goals, the capital that you will have available to allow yourself to commence trading and how you will set up your office. Your trading plan includes the details of trading: what you will trade and how you will trade it. Ask for advice and show your plan once complete to an industry veteran or to a professional in the financial world such as your accountant.  Ideally if your plan really works you could pass it to someone else to carry out and they would know exactly what to do

A good plan is not just thrown together overnight (because if that happens what you are doing is betraying yourself).  It should be the product of a great deal of research, and of testing out on a dummy machine where your money is not going to be at risk.  It also needs evaluation and reevaluation at regular intervals.

A new trader needs to acquire the right habits as soon as possible.  There is no point in rushing into live trading until he is completely and thoroughly prepared.  This is a good time for reading up on relevant industry books and articles in order to acquire as much background information as possible.

Another vital cog in his amour is the nightly debriefing. Even when just working the dummy keyboard, it really pays to check out the trading gains and losses on the day. If you don’t learn from your mistakes, other people may profit by them.

About the author

No comments

Leave a Reply

Your email address will not be published. Required fields are marked *