Getting started in trading
The currency strength meter can tip you off to several trading situations you should be aware of, such as the strength and weakness of a currency in relation to other currencies.
So, you’ve decided to become a day trader. And now that you’ve chosen your broker, you’re not really sure what to do next, are you? Below, you will find out what you need to enter the market, what and when you should be trading, and how to manage your capital responsibly.
Choose your market
While there are dozens of markets you can trade on, it is wiser to only pick one when getting started. Trading on numerous markets will affect your focus and might end up in poorly made decisions. Stick to one, learn how to trade on it, and only then consider others. It’s great if you already have your eyes on a certain market. However, you should make sure that your capital fits this market’s climate. If you haven’t made your choice yet, here are a few markets to consider.
Forex. The foreign exchange market is based on trading currency pairs, like EUR and USD. All you need to get in is $50. The bigger the amount you operate, the bigger the profit you might receive.
Futures markets. These markets offer more options for trading. You can trade commodities and indexes, such as silver or crude oil. Here, at least $1000 is required to enter.
Stocks. The minimum you can start trading stocks with is $25 000.
Get the equipment
You probably won’t need to spend any extra money on futuristic devices. We are going to lay out the basics you’ll need below:
- First, you will need a computer or a laptop. You don’t need the most expensive one. Just make sure it has a decent amount of memory storage and a good processor, so there won’t be any delays in your transactions. If you have the opportunity, get a second monitor. It is not a necessity but will add up to your efficiency.
- Next, make sure you have a good Internet connection. It is crucial to have your trades open and close on time, as a lot might depend on this. Getting a cable or a fiber-type connection is a great option. When picking a provider, check if the speed is sufficient. If the platform is not updated quickly enough, look for another one.
Find a broker
It is important that you trust your broker, so try to find the one who fits the requirement. All brokers take a commission from your trades, so while you might want to find the cheapest one, keep in mind that this is not always the best way to go. Check your broker and make sure they provide reliable services. Small brokers usually take less than major banks do.
Pick a platform
Have your broker offer you a few platforms to choose from. Find the one you feel most comfortable with. You can always switch afterward if your initial pick is not perfect.
Decide when to trade
It might seem like you need to spend your whole day in front of a computer to trade successfully, but you don’t. Find what the best hours for the market of your choice are and stick to those hours. Here are a few tips.
Forex market is available 24/7. However, each currency pair’s volatility dynamics change during different hours. For example, the EUR/USD pair’s highest volatility is between 7 and 10 a.m. EST, because both markets are open at the same time. Do you research on the markets of your currency pairs and you will quickly define the best trading hours. The futures market is best to trade on close to opening and closing hours. Pick the hours based on what you are trading, but make sure to focus on the morning EST hours.
Stocks are also best to trade with during opening and closing hours. If you want to spend a few hours on day trading, stick with the morning hours. If you want to spend less time on stocks, focus on the closing hour. If you don’t have the time during weekdays, you can always try weekend day trading.
Mind the risks
There are two things you need to determine before starting to trade: the trade risk (which is the amount of money you are ready to lose per trade) and the daily risk (the amount you can afford to lose in a day). It is recommended that the trade risk is no more than 1% of your capital. When opening a trade, use the stop loss option to avoid any risks of losing more than that.
The daily risk should be no more than 3% of your capital. This way you will be able to handle 3 losing trades per day. This should not happen often, but if it does, you might want to take a break and re-evaluate your strategy.
Develop a strategy
While there is an overwhelming variety of strategies you can take on, try not using them all at once. Pick one and stick to it for a while. Only after a while, you will be able to tell if the strategy needs some slight adjustments or if it’s just not for you. Ask your broker for a demo account first and test it out. It is recommended to spend at least 3 months on a demo account.
A demo account is a good practice, but when the time comes, you should switch to a real account in order to earn.
- At first, you might see that your live account is not doing as well as the demo was, which is completely normal. It is difficult to mimic the dynamics of a real market.
- Be consistent, do not make any rushed decisions, and learn from your mistakes. With enough practice, you will become more professional and will be able to receive a stable income.
- Follow the steps described above to make sure you’re ready to enter the world of trading. Get your equipment, choose the market, pick a broker, and get started.