Are You Ready to Trade?

Are you eager to jump into the exciting world of securities trading? If the answer is yes, you probably have a few questions about how to be fully prepared and get off to a good start. The good news is that plenty of people have been in your shoes. That means it's possible to learn from their experience and take advantage of several tried and true prep techniques.

Remember, your hard-earned money is on the line when you purchase stocks, bonds, cryptocurrency, options, commodities, and other financial instruments. So, it makes perfect sense to spend several hours, at the very least, learning how to engage in effective, profitable, safe transactions. Here are some of the most effective ways to train yourself and be ready for what lies ahead in the unpredictable environment of the global securities markets.

Learn to Do Basic Research

The internet is a wonderful place to do research on corporations. The question for most newcomers is, what kind of data is valuable? When you set out to study a company, look first at its most recent one-year stock price chart to get a feel for how the organization has been performing. Next, read two or three of the latest news articles about the organization, making particular note of recent changes in management, new products, or pending lawsuits. Finally, compare the company's earnings per share (EPS) to its share price. In general, you'll want to find corporations whose EPS is above the current share price, which indicates that it's a good value and a potential investment for your portfolio.

Use a Simulator

Paper trading is the key to getting comfortable with order placement, money management, and all the intricacies of everyday market action. All the top brokerage platforms have simulators that let new account holders practice the craft using fake money. Most sims place $100,000 in your account and turn you loose on the market. This paper trading technique is an ideal way to learn the intricacies of buying and selling exactly as you'd do with real money. The only difference is that the cash is fake and there's zero risk.

Create a Money Management System

Eventually, you'll have a funded brokerage account and will be ready to make your first purchase. Do you have a written plan that lists your own rules for spending? It can be simple and should include at least a few guidelines about when to stop trading and how much to spend on a given trade. A rule of thumb is to invest no more than two percent of your remaining account balance into a single security. So, if your account has $7,000 in it, and you want to buy a few shares of ABC Corp., the two-percent rule would limit the purchase to $140.

Read, Read, Read

Being a competent trader means staying abreast of current events. There's no need to devote hours per day to this task, but spend at least 15 minutes every morning checking the financial news. Another effective way to build your knowledge base is to read a few of the classic books about the securities markets, trading systems, and the psychology of buying and selling in the global marketplace.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes