Stock Trading 101 – All You Need to Know to Get Started in the Stock Market
First is risk capital. This is money that you have that even if you lose 100% of it, it will not negatively affect your lifestyle. This is essential not only to safeguard your life, but also because trading with money that isn’t risk capital can wreak havoc on your psychology as a trader.
Second, you will need a computer and an internet connection. You’ll need an understanding of the stock market and trading basics. And also, you’re going to need an online broker, a trading software platform, and if you choose to use them, trading tools – and access to market information.
And finally, a personal trading plan, strategy and a dedication to learning. For the basics, the first thing to focus on is learning the different order types – for example, a market order versus a limit order and also the settings for these orders, such as good-till-close or good-till-cancel. The bid and ask system is also important to understand.
Next in basics is the simulated account. A simulated account allows you to place orders in an environment that mimics live trading action. A simulated account is a great way to get the feel of trading and practice placing orders without the risk of losing money. It’s a good idea to treat simulated accounts as if they are real money accounts. This gives you the closest approximation to how it will be when it’s actually your money at stake, and it will give you the best preparation for your live trading.
The next basic to cover is information. It’s important to learn what kinds of news and information you need to know before you place a trade in a given stock. For example, things like FED announcements, earnings reports, and other pieces of news can move the stock price quickly and substantially.
Last in basics is connection. There can be great opportunities to learn from other traders and to share our experiences. There are a lot of different online communities for traders, one of them is StockTwits and I really enjoy this one so I highly recommend you check them out.
The next section is on brokers. They allow you to buy and sell securities. One of the first things to consider in choosing your broker is what level of service you want. Different brokers will offer different levels of service, for example some have hands-on services where some are a lot more basic and require that you’re more self-sufficient in managing your own account.
The second thing to consider is the costs. You’ll want to find out what kind of commission structure the broker offers, and then decide if the costs of these commissions are balanced with what this broker can provide you. And lastly, you do want to factor this cost into your trading plan.
Another important thing to consider with a broker is compatibility to your specific trading software platform. Your trading software platform is the front end software that you’re going to use that allows you to see charts and most likely place trades right on those charts. Some brokers provide a software platform as part of their offer. If this is the case, you’ll want to determine if you like the platform they offer. And if not, you’ll want to make sure they can tie in with a platform that you do like.
That takes us to the trading software section and as I just mentioned if your broker provides this, you just want to decide if you like the one they offer. If not, there are many platforms that are “broker neutral” that you can choose from. One really important thing though to make sure is that if you use trading tools like indicators you want to make sure that the trading software that you choose is compatible with your trading tools because not all will be.
So this brings us to the final section on trading tools. Technical traders often end up using tools to help in their analysis. There are many different tools available that use different market inputs to give a variety of deeper insights to trading charts and decisions. Having a good tool set can help you create your own market edge and it can really give you a more systematic way to trade so although having and using trading tools in your trading is optional, I would highly recommend that you at least look into it and consider the use of trading tools.
~ Jesse Jones, Stock Market Profile
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