Have you been waiting for an opportune time to begin trading your favorite markets, like cryptocurrency, commodities, stocks, bonds, options, futures, forex, and more? If so, it’s worth investigating how to take the first steps, perform basic research, find a reputable broker, do technical analysis, and otherwise get moving. It’s important to also review the software products that are available to new traders. Additionally, learning how to protect your capital and behave conservatively are two of the most vital skills you’ll need to pick up along the way. The good news is that it’s never been easier to get started, set up a brokerage account, learn the ropes, and become an active trader or investor. Here’s more detail about the first steps and other skills you should focus on.
First Steps For Getting In
Step one is to do a financial self-assessment and determine how much capital you can afford to place into a trading account. Never put the rent money or cash you use to pay bills into a brokerage account. It should only be an amount that you could afford to lose without altering your lifestyle. Everyone has different needs, incomes, and desires with respect to their trading activities. Be honest with yourself about what you can afford and move on to the next step, which is deciding which markets to participate in.
For some, the lure of bitcoin, gold, and blue-chip stocks is the central aspect of the activity. However, others prefer to spend a few hours per day or week operating in the forex sphere, buying and selling futures contracts, or getting involved in REITs (real estate investment trusts). It’s up to you. Base your decision on research, what types of assets you prefer to own, and the amount of capital you have on hand.
Choose Brokers Carefully
There are several reputable brokerage firms with which you can safely do all your buying and selling online. One of the best-known is AvaTrade, where new account holders get special attention, a vast number of educational resources, and expert advice. Whichever broker you select, be sure to check on fees, minimum account balance requirements, the kinds of assets you can trade, and other pertinent regulations that apply to buying and selling securities and other asset classes. Once you choose a broker to work with, move into the research phase of your self-education.
How to Study the Markets
Suppose you decide to focus on forex, foreign exchange currency pairs, as your main field of endeavor. Read available books and articles on your trading website to find out what factors affect the relationship of one currency to another. Watch forex pairs like the euro/yen (EUR/JPY) and others to observe price action for a day or so. That’s the most realistic way to become familiar with the terminology and profit opportunities in forex. But whatever asset class you prefer, do your due diligence and don’t gloss over this critical step.
How Technical Analysis and Fundamental Analysis Can Help
Read at least one short book or lengthy article in your broker’s educational section about TA and FA. These two techniques can assist you in choosing particular assets. You’ll inevitably discover the most common TA method, which is called moving average analysis. People compare the 200-day price average against the 50-day average. When the chart shows the 50-day line crossing over and above the 200-day line, that usually portends a coming increase in the value of the asset. In a similar fashion, when the 50-day line crosses beneath the 200-day line, the asset is likely to experience a price decline in the near future.
Fundamental concepts focus more on qualitative features, like the experience of a corporate board or whether the company in question is ready to release new products into the marketplace. One FA factor you’ll see frequently is EPS (earnings per share). Even though it is a numerical factor, it measures the quality of the effort made by managers to earn profits. If, for instance, a company’s EPS rises significantly, that means there are more profits available for every share of outstanding stock. Rising EPS is a good thing, and there are industry benchmarks you can use to give you an idea of how well any company is doing at a given moment in time.
Software and Practice
Familiarize yourself with the different types of software trading enthusiasts use. You’ll no doubt notice the popularity of programs like MT4 (MetaTrader 4), one of the most versatile and widely used platforms for forex traders. There are dozens of software products, platforms, and stand-alone systems. See what your broker offers because many times, you don’t have to download anything yourself.
Instead, you can use one of the versatile platforms directly from the brokerage websites. Fortunately, the better brokerage websites have simulators on which you can open a fictitious account and trade as if you were using real money. Simulators are an excellent way to get a feel for buying, selling, setting stops, placing orders, and closing positions. They are not a substitute for reality but offer beginners a way to acquire essential skills that will serve them for many years.