A lot has been said about trading in the sock or foreign exchange market, and most people view it as a money-making venture. Every day, more people go into the market without doing due diligence and lose their money just as fast. Learning to trade the market takes time, perseverance, and sheer hard work.
Thousands have lost their money from trusting the wrong brokers, having no strategy, and rushing headlong to sink funds in unworthy investments, including FX trading.
Before you sink your entire savings into trading the market, here are five steps that are the basic stepping stones to market trading.
#1. Open a Trading Account
This may seem obvious, but it might not be evident to everyone. You need to find a good and reputable online broker and open a trading account. Study the account’s interface and become familiar with it, as well as take advantage of the free trading tools that are only offered to clients.
#2. Learn how to Read
Read voraciously website tutorials, stock market books, and everything to read. Knowledge is power in this industry, and be careful not to focus too much on one trading aspect. Study everything on the market, including those concepts that might not seem very relevant at the moment, but might be relevant in the future.
In your spare time, follow the market trends, as well as study overnight price actions on the foreign market. This was not possible ten years ago, but with the advent of electronic trading, bond, forex, and equity are linked and easy to follow.
Read news sites such as CBS MoneyWatch, Google Finance and Yahoo Finance to serve as your news resource. Look further and read Bloomberg and The Wallstreet Journal.
#3. Learn how to Analyze
Learn how to study technical analysis and price charts in different timeframes. Read company spreadsheets, and this experience will help you in price predictions. In theory, securities can only go up or down, encouraging either an extended side trade or a short and quick sale. In reality, however, prices can chop sideways for weeks on end or violently whipsaw in either direction, shaking off both buyers and sellers.
#4. Practice Trading
Virtual trading platforms allow you to practice trading without jeopardising your funds. Download Metatrader4 (MT4) and practice making decisions on a simulator that has the look and feel of a real market. Make many trades, use different strategies and holding periods, and then analyse the results for where you go wrong. Most brokers also offer MT4 as part of their package alongside their proprietary platforms.
When do you stop using the simulator and start trading in real-time? There is no answer to this because simulated trade may carry a flaw that is not visible until you start trading for real. Ease yourself slowly into the real trade, using a tiny percentage of funds at first until you gain confidence.
#5. Other Ways to Trade
Experience is the best teacher and whether trading online or physically, taking classes is significant in your trading career. You can find these classes from beginner, which focuses on how to read and analyse charts, to the veteran levels.
Professional traders might hold specialized seminars, and these provide a lot of insight into specific investment plans and the general market. Most concentrate on specific asset types, specific market aspects, or trading techniques
Start trading by gaining a lot of education on the state of the financial markets, read charts, watch price fluctuations, and strategize based on the observations you make. Test your strategy by virtual simulations and keep making adjustments to your strategy until you get a pretty good one.
Finally get into actual trading with a small investment at a time, making sure not to go overboard, or let fear rule you. Being ruled by fear of losing means you will never make headway in trading the market. This business is a fair amount of risk, coupled with a fair amount of caution. Learn to balance these two aspects, and you are ready to take on the world.