What I need to Know Before I Start Trading
Before you place your first trade its important to understand some of the nuances of trading and what you need to know before you place your first transaction. Additionally, if you have never traded before it’s not clear cut where you would find all this information and where you need to start. Trading is a business and requires attention. It’s not gambling or the lottery.
Where Can I Learn About Trading?
Before you even think about transacting, you should spend some time learning about the different assets that are available to trade. Most people have heard of the stock market, but fewer know about currencies, commodities and cryptocurrencies. To learn about the different asset classes, you can search for them online, or find a reputable broker than has a good education portal.
An education portal is a section of a broker’s website that teaches you about the different assets that are offered by that broker and why they are important. You can also learn about why they move, and when prices are likely to change. Some brokers offer video information about different aspects of trading. You also might find that webinars are a great way for you to learn about trading. One of the benefits of using a broker’s website is that it is free. There are many very good education-portals but some of them might cost you money to use.
Learn About Risk
When you trade the capital markets you are taking risk. The more risk you take the larger the reward. If you are unwilling to lose money, you should not trade different assets. The goal over time is to make more than you lose. If you want to make sure you don’t lose any money, you need to invest your money in a money market fund at a bank or purchase a treasury bill.
Capital markets assets generate gains because they are riskier than investing in a bank and you are getting paid to take larger risks. To make sure that the risks you take are prudent, you need to develop a risk management framework. This methodology helps guide you through the trading process and helps oversee the risk you assume.
For example, you might start by determining you are willing to risk $1 for ever $3 that you make. This is not unrealistic. Risking $1 to make $100 is outside the bounds of what you should expect. You also need to spend time learning about how to manage your risk using different transaction such as a stop loss or trailing stop loss along with take profit orders.
Additionally, before you make your first trade you should test drive your broker’s platform by using their demonstration account. A demo account allows you to make trades and test strategies without risking your own capital. This is a great way to learn about trading without losing money. You need to learn about the platform your broker is providing ahead of making any real trades. What this tells you is that your broker’s platform is a great place to start the process of learning how to trade.