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Trading: "How do I get started?"
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We often get emails from people asking this question. Below I have given just some brief points with resources and tools on how to get started trading. Some resources are free, and some of the trading tools and solutions are part of the initial investment in learning to trade well. Trading can be treated like pretty much any business, if you want to do it properly and profitably there needs to be an investment of time and money to get setup and started.
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Read, Read, Read
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There are lots of books "out there". Which ones are the best?
The best thing I can suggest here is to visit www.ShareScene.com and have a look at the booklist and discussion on various books that address different aspects of trading. The advantage of doing this too is that you can ask people what they thought of the books they have read.
In addition there are also publications such as trading newsletters. We highly recommend the newsletter pubished by GuppyTraders, www.guppytraders.com, headed up by one of Australias leading Sharemarket technical traders, Daryl Guppy.
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Build a Watchlist
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As the word suggests, a Watchlist is a list of stocks that you can collect and begin to watch. There are 100s of companies that you could trade on the ASX, but you can't trade them all. So which do you trade? Make a watchlist. There are various websites you can use to help you get started:
www.asx.com.au. Wealth of information.
ASX Sharemarket Game. The ASX runs a trading game, great way to trade real stock (they provide the list) using a real trading platform with $50,000 in play money. You can't lose, but you can win, and you will learn.
www.tradingroom.com.au. Good free info about prices and stocks.
www.investorweb.com.au. Various Resources available.
www.investsmart.com.au. Various Resources available.
www.australianinvestor.com.au. Various Resources available.
www.eurekareport.com.au. Headed up by Alan Kohler from ABC News Finance Report and ABC's Inside Business.
www.ShareScene.com. Best share forum site on the web.
www.newsalerts.com.au. Receive an email every time a company appears in any Australian newspaper, leading Australian financial website - or when the company makes an ASX announcement.
What are you looking for? Initially you will be looking for good companies that are making money and provide low risk trading opportunities, and preferably in an uptrend. Your primary objective when starting to trade is, strangely, not to make money, but protecting and preserving capital while learning the "skills of the trade".
It may take a while to build a watchlist, but don't worry about how long it takes, it is a very worthwhile exercise and you will learn things along the way.
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Charting Price Action
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Charting is known as Technical Analysis (TA). This is where you use the price action of stocks to determine when to buy and sell. Like most things there is no shortage of charting software programs in the marketplace.
Trade2Plan does not provide charting software but highly recommends Just Data's range of charting and trading software. Click here to check out what they offer.
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Choose a Broker
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You need to employ the services of a broker in order to buy and sell shares / CFDs etc. The broker is basically the mediator between you and the stockmarket. There are many brokers. Which one/s to choose?
First of all you need to work out what kind of broking service you want. These basically fall into 2 categories, full service brokers and online brokers.
1. Full service broker? As the name suggests the broker does the research, gives the advice, and does the buying and selling for you in conjunction with your instructions. They are experts, and if you don't have the time to do all this it is a good option to consider.
We highly recommend getting in contact with Anthony Wieland, Senior Equities Advisor at Kinetic Securities. Click here to email Anthony directly. He will not only look after your broking needs personally but will also subtract the purchase price of Trade2Plan from your first trade with Kinetic.
2. Online broker? It is possible today to take total control of your own market buying / selling using an online broker. There are numerous online brokers, some provide Direct Market Access (DMA) using the webIress trading platform.
For DMA trading we highly recommend FP Markets, they operate the webIress trading platform, have a very good trading fee structure, and of course most importantly customer service is excellent.
3. Both? There are many serious traders to utilize both options. This may depend how you want to go about things. You may have a full service broker look after large investment capital, while you focus more on shorter term trading opportunities to create an income.
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Portfolio Management
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You need to be able to monitor and measure your sharemarket activity. How do you know if you're in profit or loss? How many trades have to you done? These kinds of things are tracked in a portfolio management system. There are several you may consider here:
1. Trade2Plan: Of course we recommend using Trade2Plan, especially if you are just starting out in the market and want to learn. If you have already registered with us then click here to download a fully working demo of the program.
If however, you find that Trade2Plan is not quite what you're looking for, have a close look at ...
2. Stator :: Advanced Finance Management: an affordable portfolio management solution which has been designed to meet the needs of a wide variety of traders and investors. Click here to find out more about Stator.
3. OTrader :: Portfolio Management Software: a streamlined, easy-to-use portfolio management tool for stock, option, warrant, future and CFD traders. Click here to find out more about OTrader.
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Choose Trading Stocks
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Eventually, once you have everything in place, you will want to start trading. There are a couple of things you could consider here.
1. Paper Trading: This is pretend trading, choose real stocks, real prices, real time, do everything the same as if you actually bought them with real money, but don't actually buy them with real money. Trade2Plan, can be used for real money trading, but is ideal for paper trading. The problem with paper trading, however, is that it lacks the emotion of actually putting your own money on the line. Overcoming emotional trading reactions is a very important part of surviving in the market.
2. Real Trading: When you're ready maybe just buy small amounts of 2 or 3 stocks. The minimum you can buy is $500, but $1000 is probably a good round number. You won't lose all of that unless the stock goes to $0.0000 which it won't (unless the company eventually collapses and liquidates). To help you with how much or how many to buy you can use the Trade2Plan Trade Calculator to assist in making decisions about position size.
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Conclusion
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The Share Market is an exciting place, but can also be a very cruel place if you are not prepared to learn how to treat it with respect. The above "where to start?" summary is just a guideline to get you started. It does not gaurentee success in the market and does not promise to make you a good trader, but it can point you in the right direction to give you every opportunity through discipline, patience and common sense to become a profitable trader.
Happy Trading
Ian McIvor
Admin :: Trade2Plan
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