The following is a guide for newcomers on some of the key things to be aware of when getting started in stocks or share trading.
Our first suggestion is to get educated. Study share trading books, investigate and view as many sites as you can find on on the subject of share trading. Search out training courses that you can repeat for no additional charge, especially have a look at the many home study options that are now widely obtainable.
You also need to investigate and select a really good and reliable stockbroker. All big brokers provide much the same online service these days, which means that will need to carefully examine features and prices to determine what is different about their offerings. Make sure you confirm if the broker requires you to have an extra bank account to link to your brokering account.
If you are interested in working with technical analysis based trading, which involves working with price charts, you will need to obtain charting software. You will need to select software that will fit with your individual budget and technical analysis requirements. Share trading software programs can cost from zero dollars, basically free web based applications, to a couple of thousand dollars. Our own pointer would be to suggest that you begin with a nominal outlay to limit your initial expenditures whilst you obtain a deeper understanding of the different features of the software. Then once you have figured this out you can make the best choice to complement your precise share trading procedures and style.
A critical issue when starting share trading is that you must have a strong knowledge of risk management and more specifically when to use a stop loss within your share trading. If you do not manage your exposure to possible losses when trading you will often find it tough to make adequate share trading returns. To minimize potential excessive losses in share trading you must maintain a stop loss in place for every single trade that you carry out and you must take your exit when the stop loss is hit – no exceptions. A stop loss results in just about any loss being managed and it is bait like being an insurance policy for your trade.
We commonly recommend that a stop loss level of 2% of your trading capital is used. That being said this may well change depending upon a wide range of factors including the share trading technique that you are using, the number of trades you are handling consecutively and so on. The strategy is that you’ve got a limit to the loss you are willing to take on any trade. To cut it short a stop loss will protect your cash from the chance of a considerable loss.
When you’re starting out in share trading it is a good idea to begin with practice trades, so called paper trades, instead of live trades. Start off with paper trades when you begin using a new technique or tool. You don’t want to commit some of your well earned cash at this stage whilst you are still learning. Wail till you build up your confidence with the processes and the techniques of your share trading, get comfortable setting your stop loss and putting it in place. Then begin with modest share trades. Slowly but surely work up to larger in size trades and operate a maximum of three to four trades at any given time.
Last of all, keep dependable, detailed and careful records of your share trading to have the facility further down the track to review and constantly improve your share trading performance.
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