Think of trading like learning to ride a bike: you may have falls and stumbles. But if you get back in the saddle and try again there’s a chance you’ll eventually succeed.
Like learning anything new, it will take time, patience and perseverance – but you will get there. If you’re wondering where to start, here are some ways you can begin to understand trading.
1) Open a Trading Account
Find a good trading and investments provider and open an account with them. Become familiar with the site and take advantage of any free resources they have – such as virtual trading opportunities. If you test your theories/hunches on demo accounts first, you’ll mitigate the risk.
2) Read Up
Learning from those who have experienced the highs and lows of trading will set you on a solid path. Read the top trading books to understand how the markets have evolved over the years and how you can develop the skills and disciplines required to succeed.
Some of the books to consider for your bookshelf:
- The Big Short by Michael Lewis, which tells the story of the people who saw the end of the biggest housing bubble in history coming
- Technical Analysis of the Financial Markets by John J. Murphy, which is widely regarded as a bible for traders
- Reminiscences of a Stock Operator by Edwin Lefevre which is still relevant today despite being published nearly 100 years ago.
Also Read: Reasons Why People Fail at Online Trading
3) Practice Makes Perfect
As previously mentioned, many trading providers offer demo sessions which will see your trade using virtual money.
This is not only a perfect opportunity to help you learn how to use the system and get your feet under the table. But it can also assist with determining how you can cope with losses.
Working in real-time, you can buy and sell using lots of different strategies and then use this as an opportunity to analyse the results for flaws.
4) Study and Analyse the Greats
You don’t only need to study and analyse the market and its trends; you should also study successful traders and investors – doing this will give inspiration and perspective.
Some of the greats include Jesse Livermore, Warren Buffett, George Soros, Benjamin Graham and Peter Lynch, just to name a few.
A few of the top books recommended above reflect on the successes of these traders, such as The Intelligent Investor by Benjamin Graham which looks at his strategy of buying stocks that appear undervalued (known as value investing).
Alternatively, become an avid reader of market news and learn from success, mistakes, missed opportunities and lucrative moves.
5) Have a Plan
Once you feel ready to start trading with real money and real markets you need to ensure you have a plan and strategy in place. The research you’ve done along the way will help guide you but operate within limits.
Knowing how much you’re willing to invest, and possibly lose, will be easier to manage rather than going in blind and losing more than you wanted to.
A top tip for trading is to invest in a varied portfolio and take the amount of risk appropriate to your age. Don’t rush into it, patience is key.