How to Begin Trading the Markets

There's a lot of books and courses on strategies for trading, but few talk about the basics of moving from beginner to seasoned beginner. This article will introduce you to the 9 steps that will help you transition to the next stage.

Steps

1. Choose what markets you want to trade. (stocks, bonds, mutual funds, options, futures, forex)A big mistake of many beginners is to want to trade everything... fight that urge, focus. Don't be a generalist, be a specialist.
   
2. Choose what time-frame you want to trade. Day trading(enter/exit same day), swing trading(enter/exit 2-5 days) or position trading (enter/exit 5-20 days).
   
3. Watch the markets. Just by observing the news, financial reports you'll be surprised at what you can learn.
   
4. Keep a trading journal. Even before you start trading keep notes, ideas and observations in one place.
   
5. Find or develop a trading strategy. You'll need a game plan for making it in the markets, whether your own or someone else's. The strategy should suit your trading style and temperament.
   
6. Trade without risk. Start practicing with practice accounts or paper trading. This will work out basic bugs, and help you understand trading basics. Try services[1][2] which let you practice with play money before trying out smaller trade amounts for real money
   
7. Start small. After practicing, begin trading in very small increments. You should trade amounts that are negligible, for example in stocks, enter positions that represent a small percentage (<20%) of your total account. Be sure to only trade with what you are willing to lose. If you are using a margin account, leave some lest you recieve a margin call.
8. Scale your trading. Once you experience consistent success with small positions, instead of trading more instruments just increase the number of shares for each position.
   
9. Manage risk. Insure you always have an order to exit an existing position in the event it moves against you suddenly.
   
10. Know when not trade. It is not necessary to always have a trading position. Cash should be considered a position as well.
    

Tips

• Trading isn't a sprint, it's a marathon. Don't try to make a killing right away, instead trade small and learn.
  
• At the close of every trading session, record your trades, feeling and thoughts. Your trading journal is your best teacher.
  
• Don't trade because you're bored. Sometimes not trading is the best trade.
  
• At a minimum always know your profit and loss exit points.
  
• Utilize technology to automate and simplify your trading activities.
  

Sources and Citations

• http://www.option-income.com/Trading-Rules.html
  

1. ↑ http://www.gnutrade.com


2. ↑ http://www.howthemarketworks.com/trading HowTheMarketWorks.com

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