How to do online trading?
People say trading in the market involves great risk. I say if risks are calculated why not master it and parlay it into millions in market. Well, it’s easy to say, though it requires ample of homework and penchant for monitoring the market. You got to be mentally and technically strong.
Online trading does not involve the active personal broker involvement. This saves on the broker commission and yields more profit. This is how online trading is different from usual trading. Also, with the data streaming in the charts one can make his/her decision to buy or sell when the opportunity is right and hot. Things to keep in mind before starting is not to invest big money if you are a novice, beware from the fraudulent brokerage and companies and get comfortable with sudden ups and downs of the market.
Four important things you need to start online trading is a computer with Windows XP Professional operating system preferably, High-Speed Internet connection, good portfolio in a reliable website and good software to move on. You can do trading in stocks, options, futures, currencies etc. If you want to invest your money in stock market just don’t invest altogether in a single area but diversify your portfolio in different areas. For example instead of investing all the capital in technology companies invest may be 30% in technical companies, 30% in bio-tech companies and another 30% in petroleum related company and keep 10% to cover for losses that occur due to everyday market fluctuation. This will secure your portfolio against loss to some extent.
Stocks are the shares of a company. Once you own or buy a share you become a partner of that company. The selling of that stock depends on the rise and fall of the market and also performance of that company. If you see strong indications of fall in the chart of that stock you sell your stocks accordingly, similarly buying a stock follows strong indication of rise in the chart. Stocks require a significant amount of money to be invested for a meaningful trading.
But, if your portfolio is small and you still want to go for trading then you can choose to trading “options”. Options provide all the strategies on “bull” and “bear” spread. Secondly, it also gives advantage to add small profits on the stock portfolio. Thirdly, it provides less risk when investment is small. Options trading involves buying and selling of “call” and “put” option. Futures are the commodities of the industrial stocks. It also requires strong portfolio. . There is lot of educational stuff available online for market study. Websites like CNN Money, MSN Money, optionsxpress.com and several others you may find once you Google it.
Practicing before you decide to enter in trading is a prerequisite. Psychology and technical analysis play phenomenal part. Mental training to deal with fear is necessary.
Confidence erases the fear of mind. In terms of trading one should not worry about the short term losses but always keep an eye on long term achievement. Greediness obliterates presence of mind. Once you achieve your estimated profit just close off the deal. Always stick to the strategy you make. Judgment to enter a trade is important. It is not possible to enter each and every opportunity you get. Also there is no strategy that will always be 100% profitable. Stick to your plans and fix the judgments. Main mantra of trading is minimizing your losses and maximizing your profit.
Before starting always make a strategy. Strategy involves certain rules and indications to enter a trade. Options have long range of strategies like long calls, covered calls, straddle, strangle, butterfly and many others. The deal is stick to the strategy you take up. Work like a machine involving no emotions. Work on these strategies on virtual trading. Keep a log on what you earned or lost. Evaluate it on monthly basis and decide whether you will be able to perform live or not?
Once you have practiced a strategy and feel enough confident about going live start making arrangements. A computer with high-speed internet is must for online trading. But remember after all it is a machine; it may crash or internet connection may fail while you are in the middle of your trade. So, keep your phone ready to work. In the worst situation if power goes out it is good to keep simple phone that does not need any electrical connection.
Next step is to choose an online broker. Brokerage firm places their client’s trade to the exchange. They had the license to trade in the market from these exchanges and for this they charge the client for their commission as fees. Find a reliable broker that charges reasonably moreover should provide an uninterrupted data streaming from exchange. They also provide online advices and correct all the technical issues timely. Note down all the necessary phone numbers of your broker and keep it ready beside you phone. During the technical or some other failures it will be easy to call them and close any openings that you have.
How to choose a good software is also important. It works as an interface to trade online with a demo version and live version. To understand this interface it is better to go for demo version initially. Some companies also provide free trial of the software for certain period of time. Do not hesitate to try them till you are satisfied with the software. Data coupled with easy-to-use analysis tools can help you decide whether to buy or sell a specific instrument. These tools are essentially “Probability Calculators” which gives the probability instrument price going up or down in near future based on historical performance, “Screeners” which helps to filter the instruments (company’s symbol to trade on) searched on a specific strategy and “Interactive Charting” gives full freedom to users to customize charts in their own way. Learn all the technical and fundamental analysis in the software “Help” or support menu. Fundamental analysis is all math work based on probability and market efficiency factor. Understand all the concepts before you start trading. There are various books available in the markets or online tutorials that address concepts for novice traders.
Technical analysis confirms strong opportunity to enter and indication to exit at the right time. There are certain patterns that occur in the statistical streaming of data in charts. Divergence, hidden divergence, head and shoulders pattern, double top, double bottom all these have their fixed behavior that work as a point of inflection or continuity of trend that is presently going on. Dealing with such bearish (downtrend, when the market goes down from its closing price) and bullish (uptrend, when the market goes upwards than its closing price) trends one can get a confirmation to make the judgment.
Once you are all acquainted with all this stuff, go live. Make your working environment peaceful and away from all disturbances. It is possible that you can make 55% losses initially or even more than that so, wait for the correct opportunity. Do not jump into all indications. Don’t lose the confidence just move on. With all the experience you gained over countless hours of practice don’t get swayed by emotions. Believe in the logic rather than fortune. This is all about the successful trading.
