The idea of trading can be exciting, whether you’re looking at stocks and shares, forex or even cryptocurrencies – but the reality is, jumping in at the deep end more often results in catastrophic sinking rather than natural swimming.
With that in mind, we’ve talked to dozens of seasoned traders such as the team at Neowave who specialise in the Elliot Wave Theory and asked what advice they’d give to someone just starting out. The following advice may be the difference between making it as a trader – or going back to the day job with a bruised wallet and ego…
- Understand the terminology
When you start exploring the world of trading you’re going to come across dozens – if not hundreds – of terms and acronyms that seem to defy simple contextual explanation.
Rather than point you toward a comprehensive list – virtually every expert we talked to suggested going away and Googling the term. Depending on how relevant the term seems when compared to your trading plans or hopes should dictate your next step – does a quick overview suffice? Or would it be helpful to dig a little deeper and read some articles or books on that specific subject?
Make notes and be prepared to revisit your list of new knowledge frequently to check your understanding as your reading grows.
- Read some recommended books
Like most industries or pursuits, there are some cornerstone books that should occupy every potential trader’s bookshelf.
Believe us, if you’ve got an idea – no matter how humble or how grand, someone’s had it before and they’ve talked about it in some depth. Read – and always have critical eyes – whether it’s your opinion or someone else’s, nothing should be taken as gospel until you’ve gone on to gather further knowledge of how it pans out.
Start with ‘How to Make Money in Stocks’ by William O’Neil – it’s a classic – and a great guide for people new to trading an investing.
- Dig into authority websites
While specialist trading book sales are still booming – it’s important to understand how the internet has changed the world. For every modern Warren Buffet writing a book, there’s another 10 who are blogging or writing online about their experiences and handing out exceptional advice.
Content marketing is now acknowledged as being as close to a sure-thing as is possible in the world of marketing – and content marketing in the trading world means there are high level traders putting pen to paper about what works and what doesn’t.
Again, critical eyes are vital. Some content marketing is just a thin cover over an attempt to sell you something – so be careful – but with time invested in reading the most reputable blogs, you’ll see trends in trading advice develop.
- Explore forums and groups
The wonderful thing about trading is that sharing information on a small scale doesn’t impact your investment – so, tell a friend or colleague about a stock you like the look of and they’re not going to whip the opportunity out from under your nose or send its price through the roof.
The same is true of forums and social media groups. If you want to get involved and ask questions then great – but if you just want to treat the groups like a virtual bar or café and quietly sit and listen to what other people are talking about – you can do that to. Again, there’s no one who’s going to give you all the answers, but you’ll start seeing interesting information about how other people work, the resources they’re using the results they’re seeing…
- Start following your chosen market
Think you’re going to get your head around currency trading with no idea of what’s happening the world’s socio-economic news? Think again!
Trading isn’t about a quick glance at figures then running with a hunch – some of the best traders make the world’s economy their job – with trading the small part of the day in which their knowledge is monetised.
Find good news sources, read good blogs, understand the world of business – it’s all going to have an impact on what you’re doing, so you’re going to need to be ahead of the game. There’s no finite amount of information that’s enough – so instead of consuming market news 24/7 – start paring your media down to the stuff that’s really valuable.
- Find courses and classes
This tip comes with a hefty caveat – so make sure you read to the end.
Enrolling on courses, lectures or seminars with great trading minds can be a good idea. There’s a core of valuable deep information that virtually no master trader is going to give away for free – so signing up to get this information could be worth it’s weight in gold.
Here’s the caveat though:
Reviews and recommendations are absolutely vital here. Anyone could put together a site, a course or a master ‘scheme’ to get rich, charge you a fortune – and deliver nothing more than recycled nonsense. While this might just seem like a waste of money – it could actually be more dangerous than that – bad advice dressed up as a good advice can lead to massive losses.
Talk to people who’ve been on the course. Read reviews. Believe the hype when you’ve seen how it’s played out for others.
- Make yourself at home and practice
Signing up to an online trading/stock broker account is a good step – even if you’re not ready to invest just yet.
It’s useful to get a feel for how everything looks and functions before you punch your card details in and start running with real money. In fact, a number of broker platforms offer virtual trading that means you can get started with no real money going in.
Understand that you don’t have to have an extensive portfolio from the word go – in fact, most traders, when asked how they would invest their money today, say that they would make a few trades and sit on the largest part of their capital until they got a feel for what was performing on the day and into the immediate future.
Starting out is an important step in the trading process. Passing your driving test and jumping into a Lamborghini is likely to be a recipe for disaster – in the same way jumping into trading with a huge chunk of capital and no idea is. Build your knowledge slowly, it might be the most important investment you’ll ever make.