Trading: Everyone’s Gotta Start Somewhere
- fenwick136
- Jun 19, 2023
- 5 min read
Following last week’s introduction to trading. It couldn’t be a better time to get momentum.
We talked about acquiring skills in wealth creation, adapting to dynamic markets, entrepreneurial mindset, risk management, developing analytical skills and critical thinking, emotional discipline, and psychological resilience.
Now, to connect to present market conditions...
This year, we've had seemingly endless negative rhetoric in the headlines. From inflation concerns to a banking crisis, supply chain issues, US debt ceiling concerns ($31.4trn and running), a mortgage crippling interest rate hiking cycle (The US has now hiked rates 10 times since 2022!), the ongoing trade and geopolitical impact of the Russia and Ukraine conflict, energy supply/price concerns, recessionary fears and to top it off the US government is now cracking down on crypto…
But wait, now look at where asset prices are:
US stocks (SPX 500) are officially in a bull market. Defined as a +20% rise or more from recent low in October 2022. GBPUSD has rallied over 20% in the same period. Bitcoin is up +60% YTD, and AI related stocks like NVIDIA are up +192% YTD. These are just a few examples that paint a very different picture.
It should be clear that opportunities to trade are everywhere if you are looking for them… not blindly following news rhetoric.
That’s not going to change. Markets will continue to be volatile. Here's another reminder to look at where we are in the market cycle and what that means for price action and volatility:
Where We Are in the Big Cycle: On the Brink of a Period of Great Disorder: https://www.linkedin.com/pulse/where-we-big-cycle-brink-period-great-disorder-ray-dalio/?published=t
This leads me to the question: “Has your bank balance changed as a result of this year’s moves? And if not, then why?”
So that’s the theme of today’s post.
The Problem:
It’s not that you missed your chance. It’s not that it was easier in the old days. It’s not that you aren’t lucky enough to see the opportunities that others do. It’s not even that you need a crystal ball to make money from financial markets.
The problem is that most people simply don’t make a start.
Most people know trading can bring value to their lives. Many see others making money around them and think “I must research that”. They even see traders that are boasting about making more money than CEOs. But never actually make a start themselves as they don’t know the basic steps.
Lets start the journey with a first brick in the wall.
“Rome wasn't built in a day, but they were laying bricks every hour”.
The Opportunity:
Opening a trading account can take less than an hour, which gives you access to trade almost any mainstream market in the world. The same as most other traders.
Here is a basic 7 step process to start trading. We’ll expand on these topics continually throughout the journey of this blog:
Step 1: Educate Yourself
It's essential to educate yourself about financial markets. Gain an understanding of the different asset classes, such as stocks, bonds, commodities, and currencies. Familiarize yourself with key concepts like supply and demand, technical and fundamental analysis, and risk management strategies. Aside from this blog, there are educational resources available in many places, including online courses, books, webinars, and forums. Take advantage of these to enhance your knowledge and build a foundation. Remember, there will always be more to read and learn, so we must not let learning lead to knowledge. Let every piece of learning lead to action as quickly as possible.
Step 2: Define Your Goals and Risk Tolerance
Clearly defining your goals and risk tolerance is vital. Determine whether you're looking for short-term gains or long-term investments. Consider your financial objectives, time commitment, and risk tolerance level. Understanding your personal risk tolerance will help you choose appropriate trading strategies and manage potential losses effectively. Remember, this is a business, and you want to stay in business!
Step 3: Choose a Trading Style
Different trading styles suit different personalities and goals. Some popular styles include day trading, swing trading, and position trading. Day trading involves making multiple trades within a single day, while swing trading focuses on capturing short- to medium-term price swings. Position trading involves holding trades for more extended periods, often weeks or months. Explore and experiment with various styles to find the one that aligns with your goals and suits your personality. Set yourself up to win from the beginning!
Step 4: Select a Reliable Brokerage Platform
Choosing a reputable brokerage platform is crucial for executing trades efficiently. Look for a platform that offers a user-friendly interface, competitive pricing, a wide range of financial instruments, reliable customer support, and robust security measures. Ensure the platform is regulated by recognized authorities, as this provides an additional layer of protection for your funds and trades.
Step 5: Develop and Test Your Trading Strategy
A well-defined trading strategy is a cornerstone of success. Create a strategy that aligns with your goals and risk tolerance. This should include entry and exit rules, position sizing techniques, risk management protocols, and an understanding of market conditions that favour your strategy. Back test your strategy using historical data and refine it based on the results. Demo trading can also be useful to practice your strategy in a simulated environment before risking real capital.
Step 6: Monitor Market Trends and Develop Analytical Skills
Keeping up with market trends and staying informed is essential for successful trading. Develop analytical skills to evaluate market conditions, identify trends, and make informed decisions. Utilize technical analysis tools, read financial news, and follow reputable analysts and financial publications. Continuously refine your skills through practice and staying updated with the latest developments in the markets.
Step 7: Start Small and Gradually Increase Exposure
When you're ready to start trading with real money, it's important to begin with a small capital allocation. This approach allows you to gain practical experience and manage risk effectively. Gradually increase your exposure as you become more comfortable and confident in your abilities. Remember that trading involves both wins and losses, and it's crucial to maintain discipline and manage your emotions throughout the process.
Trading is a continuous learning process which requires patience and perseverance. Keep moving forward.
A Call to Action:
For me, I started short-term trading on IG markets, and find it extremely easy and reliable to use. I can use it on any device from desktop and laptop to iPad and mobile phone. There are so many companies to choose from, but in my experience this company has worked well. Link below:
I spread bet for the reason it is tax-free. Turning positions over regularly can create complex tax accounting and so spread betting makes it simple. It’s also a great way of getting leverage to increase position sizes with lower capital requirement. That said, leverage can be extremely costly when used ineffectively, and so should be treated with caution.
Everyday, I read the Financial Times for market and news coverage. Reuters and Bloomberg are market leaders, and are excellent for professional traders, but come at a hefty cost for beginners. Their free resources are useful as well.
I trade with multiple different strategies which we'll discuss in depth and grow along this journey. That said, I'd highlight that market conditions are continually changing. It pays to understand multiple strategies, for different markets, and to be well prepared to take advantage when opportunities arise or events take place. Otherwise, we'll just end up spectating like the rest of the world.
"Plan the trade, and trade the plan."
"Every battle is won or lost before it is ever fought"
What's getting in the way of you making money from financial markets?
Message me.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of financial advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
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