Trading securities can tremendously benefit your business by giving profitable returns, diversifying your company assets, improving your balance sheets, and more.
However, without substantial industry knowledge, trading can wreck your business rather than build it up.
If you’re a business owner who wants to learn to begin trading securities, check out this guide, where I outline six foundational steps.
1. Read educational trading resources.
Familiarize and educate yourself with basic trading concepts, such as what trading is, frequently used terms in the industry, best trading tools by trading exchanges, and more.
Go through online and offline resources and learn from the experts. Read up trading eBooks and blog posts, attend classes and webinars, and others.
You can also check out educational centers by your chosen trading brokers (more on this later).
2. Determine your trading style.
As a new trader, one of the first decisions to make is the trading style you’ll implement. This is crucial because your choice impacts the required duration and effort you’ll put in.
Consider these three beginner-friendly trading styles:
Swing trading is slow-paced. It lets you hang onto your ranks for a day to a few weeks at most. When you’re trading here, you try catching short- to medium-term price movements (or swings).
Swing trading is best when you:
- Wish to try out trading;
- Have little trading time to allot;
- Aim for a reasonable revenue potential;
This style is even slower-paced than swing trading. You hold onto your position from a few weeks to several months or years, catching extensive market trends through trend-following strategies.
Position trading is suitable if you:
- Want unhurried trading with little time investment required;
- Have no problem with riding market trends for long durations and making minor trading mistakes at times.
This style allows you to forego the frequent monitoring of your trading strategies and delegate it to your computers.
Algorithmic trading works best if you:
- Are intent about trading and even open to full-time opportunities later in life;
- Wish to day trade without staying in front of your computer screens all day long.
- Prefer keeping your primary or day job (and, during your spare time, strategize on your computer trades).
3. Decide on the securities to trade.
Which investment product would you like to trade?
Take a look at these two samples and how they possibly suit you:
Stocks are shares in the ownership of a company. Trading stocks is best if you:
- Are keen on trading popular brands, e.g., Apple and Amazon;
- Want a vast selection of stocks and securities;
- Opt to concentrate on swing trading, so you frequently get numerous options and can use one strategy for several stocks.
These are contracts to purchase or sell predefined amounts of assets or goods at a future price and date. You can take comparatively huge positions even with a modest trading account.
Futures trading is excellent if you:
- Wish to access many commodity markets, most prominent stock indexes, and some currency pairs;
- Prefer trading markets open almost 24/5;
- Are trading short-term.
4. Tap a reliable trading broker.
Start by picking those regulated by authorized entities, such as the CySEC, FCA, MIFID, location-based security and investments commissions, etc.
Check out their websites for other critical information on their establishment, contact details, clients served, and even rewards garnered if any.
For instance, you can explore working with an FBS trading broker.
FBS is an international brand present in more than 150 countries and regulated by the CySEC (ASIC for FBS Australia, etc.).
Companies under FBS have 7,000 accounts opening daily, received more than 40 international awards, and traded with over 16 million clients across its serviced countries.
This gives you an idea of the brand’s trustworthiness in working with you securely and even profitably.
Next, see which broker companies and trading platforms offer services suited to your preferred securities and trading styles.
Choose also brokers that are convenient and cost-efficient to trade with and provide sufficient technical support.
5. Choose and open your trading account.
Different securities have respective trading accounts. For newbie traders, start small and open mini accounts (or equivalent).
This lets you begin trading and get experience while risking only a small capital, rather than something you can’t afford to waste.
You typically open an account by filling out an application form online. When the broker finishes the validation process, they create an account number and email it to you.
You’ll then need to fund your opened account to begin trading. Ask your broker for any more requirements after opening your account.
6. Learn about the various order types.
Understand the different order types to determine the price you’ll trade at once you’ve activated your account.
This order type is the most popular one. It is essentially an order to buy or sell at the nearest price that the market offers.
You can obtain market orders when you click the buy or sell button without configuring anything.
These are orders that you can only execute at a limited price or a better one.
For instance, if you sell limit orders with $220 as the limit price, you can sell the security at that amount or higher.
If you buy limit order with a limit price of $150, you can only buy a security for that amount or lower.
This type remains in the market until the price hits an indicated stop level. When it reaches that point, the order becomes a market order.
Let’s say the market trades at $130, and you issue a buy stop order with $95 as the stop level. When the price reaches $95, your order now turns into a market order.
Stop-limit orders are a mix of the stop and limit types.
When the security’s price hits the stop level, the limit order is issued and prompts you to begin buying or selling the stock at the set limit price.
Suppose you have a buy stop limit order with the stop price at $140 and your limit level at $135. When the market goes down to $140, you receive alerts from your limit order to sell at $135 or lower.
7. Craft a solid trading plan.
A robust trading plan increases your profitability and helps you remain level-headed. After all, trading can become an emotional activity for beginners.
Strategize the amount you’re willing to trade at which price and how far you will let the security plummet before pulling out.
Applying the best order type for you is one way to help you stick to your plan and tone down your emotional impulses.
For example, stop-limit orders only alert you to buy or sell when securities drop to a specific amount. This reduces risk and incurred losses for you.
Ready to venture into trading securities?
Becoming a profitable trader requires you to invest time and effort, but if you keep at it and succeed, your enterprise can experience long-term benefits.
Keep these steps in mind as you start out and gradually increase your industry knowledge to generate heaps of money and avoid business-wrecking mistakes.