Explanation of trading for beginners | Learn how to trade in 5 steps
Do you want to start trading, but don’t know where to start? Here is an explanation of trading for beginners in 5 steps.
Millions of people try to enter the world of trading in the markets, but they often come out of it a little poorer, but also wiser after not being able to reach what they want. The majority of those who fail in the market have one thing in common: they have not mastered the basic skills needed to be able to turn the odds in their favor. Also, if one takes enough time to learn these skills, it can increase the odds and chances of success.
Global markets attract speculative capital like insects are attracted to light. Most people trade without understanding why prices are going up or down. Instead, they chase trading recommendations, and follow the word of the pretenders with knowledge causing them to make meaningless buying and selling decisions. In fact, the best way to succeed in trading is to learn the skills and how to trade the markets and actually start after you are ready and familiar with all the secrets and intrigues of trading.
Explanation of trading for beginners
We will help you learn how to start trading the right way in 5 basic steps.
1. Open a trading account:
Find a good online trading broker and open a brokerage account to trade in the stock market. Even if you already have a personal account, it is not a good idea to keep another separate professional trading account. Get familiar with the account interface and take advantage of free trading tools and research offered exclusively to clients. A number of brokers offer virtual trading opportunities and economic and financial content sites, including Money Secrets, offer online broker reviews to help you find the right broker as well.
2. Learn to Read: Market Conquest Course.
Financial articles, stock market books, trading and investing content on websites, etc. are just examples and there is a wealth of information out there and much of it is inexpensive if you want to take advantage of it. It is important not to focus too narrowly on one aspect of the trading game. Instead, study everything related to trading and the markets, including ideas and concepts that you don’t feel you will need directly in the trading process. Trading begins on a journey that often ends in an unexpected destination at the starting line. An extensive and detailed background on the market will come in handy, if only you learn again and again.
Here are five books that you must read as a novice trader in the field:
- Stock Market Wizards by Jack D. Schwager
- Trading for a Living by Dr. Alexander Elder
- Technical Analysis of the Financial Markets by John Murphy
- Winning on Wall Street by Martin Zweig
- The Nature of Risk by Justin Mamus
Start by following the market every day in your spare time. Get up early and read about the movement of prices throughout the day and compare them in the foreign markets. (Traders didn’t have the ability to monitor global markets two decades ago, but all of that has changed due to the rapid growth of electronic trading and derivative instruments that connect all the stock, forex, and bond markets around the world.)
Economic news sites such as Yahoo Finance, Google Finance, and CBS MoneyWatch can serve as a great resource for new investors. For more cutting-edge coverage, you need look no further than The Wall Street Journal and Bloomberg.
3. Learn technical and fundamental analysis:
An explanation of trading for beginners begins with studying the basics of technical analysis and viewing price charts and charts. You might think that fundamental analysis offers a better path to profits because it tracks growth curves and revenue streams, but traders live and die because of price action that deviates sharply from the underlying fundamentals. Don’t stop reading the company’s spreadsheets because they give you a trading edge over someone who ignores it. However, it probably won’t help you survive your first year as a trader on its own.
Your experience with charts and technical analysis now takes you into the magical world of market forecasting and price prediction. Theoretically, securities can only go up or down which encourages long-term investment or short-term trading. In fact, prices can do many other things including moving sideways for weeks at a time or wildly moving in both directions jolting buyers and sellers.
The time horizon becomes very important at this juncture. Financial markets present trends and trading ranges with fractal characteristics that generate independent price movements over short, medium and long-term periods. This means that a security or index can know a long-term uptrend, an intermediate downtrend, and a short-term trading range, all at the same time. Rather than complex forecasting, most trading opportunities will emerge through interactions between these time periods.
Buying the dip provides a classic example, where traders jump into a strong uptrend when they are sold into a lower period. The best way to examine this field in 3D is to look at each asset (stock, currency, commodity..) in three timeframes, starting with 60 minutes, then daily and weekly charts.
4. Practice Trading and Applying Theories:
Now is the time to get your feet wet without compromising your trading stake. Demo or virtual trading (demo trading accounts) provides an ideal solution that allows beginners to follow market movements in real time and make buying and selling decisions without using real money. Take several trades with different holding periods and strategies, then analyze the results for obvious flaws.
All financial brokerage platforms and companies have the possibility of opening a demo trading account at the disposal of clients, and allow participation in virtual trading using their real trading systems.
So, when should you make the transition to start trading with real money? There is no perfect answer to this question because simulated trading has drawbacks that are likely to become apparent once you start trading for real, even if your results in demo trading seem perfect.
Traders need to live peacefully with the dual feelings of greed coupled with fear, as hypothetical trading does not evoke these feelings which can only be felt through real experience of actual profit and loss. In fact, it is this psychological aspect that drives a lot of novice traders out of the game more than making bad decisions. The novice trader needs to familiarize himself with this challenge.
5. Check out other ways to learn and practice trading:
Although experience is a good teacher, you should not forget additional and self-learning as you progress with your trading experience. Whether through online or face-to-face courses. You can find levels ranging from explaining trading for beginners (with tips on how to analyze the above analytical charts, for example) to professionals. More specialized lectures, often organized and supervised by a professional trader, can provide a good broad understanding of the market as a whole and specific investment strategies. Most focus on a particular type of asset, a particular aspect of the market, or a specific trading style. Some may be academic and theoretical and some may be more like workshops where you have to actively participate and test entry and exit strategies, and other exercises (often with a simulator).
Getting paid for research and analysis can be educational and informative. Some investors may find watching or observing market professionals more beneficial than trying to apply newly learned lessons themselves. There are a large number of paid subscription sites available across the web.
It’s also a good idea to get a professional mentor or trainer to guide you and give you advice when needed. If you don’t know one, you can purchase this service. Many online trading schools offer mentoring as part of their continuing education programs.
The first step towards trading as a beginner
Once you start trading with real money, you will have to handle your trades and manage the risks involved. Each position is related to a certain retention period and technical parameters related to take profit and stop loss, which requires your timely action upon reaching it. Now, you have to keep in mind the mental and logistical requirements needed when you are holding three to five positions at a time as some positions can move in your favor while some will move in the opposite direction.
Fortunately, you have plenty of time to learn all aspects of trading management, and be careful not to overburden yourself with too much information. If you haven’t already, it’s time to start a journal that will document all of your trades, including the reasons why you take the risk, as well as holding periods and final profit or loss numbers. This event and observation diary lays the foundation for a trading feature that will take your beginner status and allow you to earn and make money from the market on a consistent basis.
Things novice traders should know
Learning how to trade the financial markets begins with educating oneself on how to read and analyze the financial markets through charts and price action.
Using technical analysis in conjunction with fundamental analysis to decipher the price action.
The practice of trading through demo accounts makes you a professional trader or, at least, allows you as a beginner to test what you have learned before depositing real money and trading it in the markets.
Summary:
Now that you have seen the explanation of trading for beginners, you hope that you understand what is required of you and understand that trying to jump into trading without knowledge and rushing in the hope of quick profit will only reap from them disappointments.
Start your trading journey with a deep learning about the financial markets, then start reading the charts and watch the price movements, and then build your own strategies that suit your goals. Test these strategies through demo trading, analyzing your results and making constant adjustments and improvements. Then go to the first stage of your journey in actual trading without risking more than you can bear, especially in your beginnings and before you become an expert and familiar with trading management and market psychology.
This is how you take your first steps in the right direction towards trading and reaping the profits you desire.
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