How to Start Trading: 7 Steps to Follow

Trading involves speculating an underlying asset’s market price movement without owning it. In essence, with trading, you’re predicting whether the underlying asset price will rise or fall.

The prediction is done by buying or selling the asset via an online broker. Traders sell stocks, for example, when they predict the price will fall and buy when they speculate it will rise.

Trading can be done in several markets including stocks, commodities, forex, indices, cryptocurrencies, etc. Each market offers unique assets, opportunities, and risks. Understanding these nuances is crucial for executing successful trades.

While trading the stock price or other markets can potentially result in significant gains, it is crucial to approach trades with caution. The markets can be extremely volatile and unpredictable making it necessary to have a clear understanding of risk management when trading stocks, options, futures, etc. as well as a well-defined trading plan.

We will provide a step-by-step walkthrough of the 7 essential steps to begin trading, equipping you with the right knowledge to navigate the complexities of trading.

Step 1: Get Trading Education

To be a successful trader, as in any industry, you must equip yourself with thenecessary knowledge of the markets and their terminologies. To do so, you can go through the one-on-one mentorship programs, coaching sessions, and courses usually available in the Academy section like the one you are in right now.

That said, there are key concepts to grasp during your education and these include some of the following:

• Market Dynamics: You must understand how economic indicators, news events, and geopolitical happenings affect the markets and the influence of supply and demand on asset price movements.
• Fundamental and Technical Analysis: New traders need to understand fundamental analysis, which involves company evaluation and prospects, and technical analysis (the use of charting tools and market patterns to predict asset price movements).
• Risk Management: Trading is inherently risky and newbies can potentially lose their entire capital. So it is crucial to learn proven risk control techniques such as stop loss, guaranteed stop orders, take profits, etc., and trading styles like portfolio diversification to protect your funds.

By investing time in trading education, traders can lay the foundation for long-term success and potentially cut down on massive losses.

Step 2: Choose a Broker or Funded Account

The type of broker/funded account you choose directly impacts your trading experience and outcomes. So before choosing a trading platform, there are several factors to consider:

Reputation

While there are numerous brokers and funded accounts available, some are scams and not worth trading with. So before choosing a platform look at its reputation by checking for its regulatory compliance, licenses held, and feedback from existing traders. Trustpilot is a great platform to know what other users have to say about a platform or funded account. Trading communities like the TradingView Community are also great spots to check for a platform’s reputation.

Funding and Payout Process

If you opt for a funded account instead of a broker you should consider its funding process, capital availability, and payment process. A good funding program shouldoffer adequate funding, with clearly defined rules for evaluation and funding. There should also be a clearly stated payout process.

Platform Features

Choose a platform that offers features that fit your trading needs. Ensure that the platform offers access to your preferred markets and instruments.

If you choose a funded program, the platform mustsupport your preferred trading strategies, offer appropriate indicators, and risk control tools. Some brokers also place limitations on strategies like hedging, so ensure you know if your choice has strategy restrictions. The platform should also have good customer support.

Fees Structure

The fee structure can affect the overall outcome of your trades. Go for a platform that clearly states its fee structure and any additional charges incurred.

You’d also want to go for platforms withtight spreads and low commissions. Aside from trading fees, you should check if the platform has hidden fees like inactivity fees, platform fees, and transaction fees.

Types of Trading Platforms Available

The broker you choose should offer platforms that cater to your trading styles. Available trading platforms should offer access to tools such as charting tools, indicators, real-time market data, etc.

Also consider if the platform is web-based, desktop-based, or mobile-based as this can affect your accessibility. Mobile-based platforms enable you to trade on the go but offer limited screen size and functionality. Web-based platforms offer access from any device with an internet connection and offer a wide range of features/real-time updates.

Desktop-based platforms usually offer more advanced features and a customizable trading experience. They, however, require software installation on a dedicated device.

It is best practice to choose a broker that supports all 3 platform formats for more flexibility.

Account Opening Process

When choosing a broker/funded account, consider the account opening process. Check the requirements for account creation, the ease of account creation, and the account creation fee (if any). It is best to choose a platform that offers a seamless account creation process compliant with regulatory requirements.

Step 3: Develop a Trading Plan

Once you have found the right platform that aligns with your goals and created an account, the next step is to develop a trading plan.

A well-defined trading plan acts as a roadmap that will help you navigate the volatility and challenges of the markets. Traders who dive in without a good trading plan often end up making poor trading decisions and incurring losses.

A good trading strategy helps define the type of markets or instruments you wish to trade. This prevents you from making impulsive or herdingdecisions.

A good trading plan also ensures that you establish clear achievable goals and offers you the emotional discipline required to achieve them. Plus, it includes appropriate risk control strategies including stop loss, position sizing, and take profit. Thislimits your losses and prevents you from losing all your trading capital to a single bad trade. It also enables you to track your performance.

Step 4: Practice with a Demo Account

Before trading on a live account, you should practice with a demo account. A demo account allows you to trade with virtual funds in an environment that simulates actual market movement. This enables you to test the efficiency of your trading plan and risk control strategies before using actual funds.

Here are some tips to take note of when practicing with a demo account:

• Exact Conditions: Practice with the exact conditions you intend to use in the live account. This entails using the same trading amount as you would in the live account, trading within the timeframe you would trade in the live account, and using actual market data that mimics live market movement.
• Develop and Stick to a Trading Plan: Use your set trading plan on the demo account. This will allow you to determine if your strategy will be successful. Also, implement your risk control strategies which will help develop the discipline to stick to them when you start trading.
• Practice Emotional Control: Emotional discipline is required to avoid impulsive decisions when trading. So you should practice managing your emotions when using a demo account as this will help you to be in control when you start live trading.
• Track Your Progress: Tracking your progress while practicing with a demo account will help you easily identify your strengths and weaknesses. This will help you to work on them before trading in the live account.

You should transition to a live trading account after you have achieved your trading goals and properly tested your strategies.

That said, trading in a live account should not deter you from still practicing with a demo account. You can occasionally practice and test every new strategy on the demo account even when you’re trading on a live account.

Step 5: Start Small and Gradually Increase

When you start trading, you should start small and gradually increase your trading capital as you gain mastery. The best way to achieve this is by practicing position sizing.

Position sizing enables you to set aside an exact amount to enter trades with. This risk control strategy prevents you from opening trades with your entire trading capital.

The higher the trading capital used, the higher the risk. Trading with your whole capital can lead to the loss of your entire trading capital if you make a bad trade. This is why position sizing is important.

It is also important to avoid over-trading. Avoid placing multiple trades within a short time even if they are small. The little losses incurred this way can end up blowing your entire capital if done continuously.

It is best to use trading plans and risk control strategies that enable you togradually grow your account while minimizing loss.

Step 6: Manage Your Emotions

A key requirement in trading is emotional discipline. Lack of emotional discipline can result in impulsive trading decisions which can most times cause loss. The financial markets are volatile and it is important to have the discipline to stick to your trading plan regardless of which direction the trade goes.

Emotional reactions like fear, greed, and impatience can negatively impact your trade outcomes. 

Step 7: Continuously Learn and Adapt

The financial markets are dynamic, so it is imperative to stay up to date with current trends, economic events, market news, etc. for long-term success. You can keep yourself informed on recent happenings by following financial news, participating in trading communities, and studying market analysis from experts.

In addition, regularly review your trading performance and strategy to identify areas for improvement. Analyze your wins or losses and adjust your trading style accordingly. You must also be prepared to adapt to economic shifts and changing market conditions on the go.

In adaptation, you should be open to exploring a different trading style that may be more suitable to the current market condition. Also, if you have issues adapting your strategy (day trading, news trading, etc) consider consulting with an experienced trader or financial advisor.

Additional Considerations: Funded Accounts

A funded trading account allows traders to participate in the markets without risking their own capital. To get funded, traders need to purchase the account and pass an evaluation phase in which their trade style, risk management strategies, and overall trading skills are tested.

Upon success, traders receive funding from the program.

Funded accounts offer benefits like personal capital risk-free trading, and potential significant income due to increased capital.

However, while funded accounts provide quality opportunities theyrequire stricter discipline to attain/maintain, as well as, want experienced traders, not beginners.

So before considering a funded account, it is essential to have a good grasp of trading basics and a well-defined approved trading style.

Conclusion

Trading can be fulfilling and rewarding but it requires discipline, knowledge, and a long-term perspective. Remember that the first step is toget educated on the financial markets, and understand its terminologies and the tools needed to make informed speculations.

Once you’ve gained the required knowledge choose an online broker with a solid reputation, next, develop a trading plan, and then test your strategy with a demo account.

If you’re pleased with the results of your strategy on the demo account you can then transition with a small capital to a live account. Next, gradually increase your capital based on your comfort level and ensure your emotions are in control by adhering strictly to your strategy.

Lastly, continuously learn new techniques relevant to the current trends/news and adapt your strategies as needed. Also, ensure to use of risk management techniques like stop loss orders and portfolio diversification.

Trading isn’t a get-rich-quick scheme. It requires patience and perseverance plus the willingness to learn from your success and failure. Traders can also lose their entire capital when trading and gains aren’t guaranteed.

FAQ

How much Money do You Need to Start Trading with?

You can start trading with as little as $1 depending on the online broker you register with. However, most brokers require a minimum deposit of $100. You can also begin trading with zero capital if you opt for a funded account but you’ll need funds to buy an evaluation.

What is the 3-5-7 Rule in Trading?

The 3-5-7 rule is a trade management technique where the trader takes gains at 3 different levels: 3%, 5%, and 7%. This method allows traders to lock in gains gradually instead of hoping for larger returns that may never come.

Is Trading Easy to Learn?

Trading education is continuous because the markets are ever-changing. So it requires discipline, patience, and a thorough understanding of the basics. It isn’t easy but it is worth it in the long run if you want to be a successful trader.

Which Type of Trading is Best?

The best trading strategy (day trading, swing trading, position trading, etc) depends on the underlying asset you’re speculating on, your trading ideology (aggressive, long-term. etc), and the current market sentiment.