In the last article, we were talking about the necessary steps in the trading market. Let us continue from where we finished.
So, we said that you should look at price charts, a thousand of them, and study the basics of technical analysis, in all time frames. You might think that fundamental analysis is offering a better path to profits because it tracks revenue streams and growth curves. Nevertheless, traders live and die with price action that diverges sharply from underlying fundamentals. Do not stop reading company spreadsheets. It is because they are offering a trading edge over those who ignore them. Nevertheless, they will not help you to survive your first year as a trader.
Your experience with technical analysis and charts brings you into the magical realm of price prediction. Theoretically, encouraging a short or along-side trade, securities can only go lower in or higher. Nevertheless, prices can do many other things. For example, they can be whipsawing violently in both directions or chopping sideways for weeks, shaking out sellers and buyers.
At this Juncture, the time horizon becomes extremely important. Financial markets grind out trading ranges and trends with fractal properties. That properties generate independent price movements, at long-term, short-term, and intermediate-term intervals. Most trading opportunities will unfold through interactions between those time intervals, rather than complicate prediction.
With traders jumping into a strong uptrend when it sells off in a lower period, buying the dip offers a classic example. The best way to examine that three-dimensional playing field is to look at each security in three-time frames, starting with sixty minutes, daily and weekly charts.
Now it is time to get your feet wet without giving up your trading stake. Virtual trading, also called paper trading, offers a perfect solution. It allows the neophyte to follow real-time market actions, making selling and buying decisions that form the outline of an academic performance record. Usually, it involves the use of a stock market simulator. That simulator has the feel and looks of an actual stock exchange’s performance. Moreover, it makes lots of trades, using different strategies and holding periods, and then analyzes the results for apparent flows.
Investopedia has a free stock market game. Thus, many brokers let clients engage in paper trading with their real money entry systems as well. That has the added benefit of teaching software. Therefore, you will not hit the wrong buttons when are you are playing with family funds.
You might have a question about when you should make the switch and begin trading with real money. Unfortunately, there is no perfect answer to that question. It is because simulated trading carries a flaw that will show up whenever you being to trade real.
Traders must co-exist peacefully with the twin emotions of fear and greed. Paper trading does not engage with those emotions.
It can only be experienced by actual loss and profit. Usually, that psychological factor forces more first-year players out of the game than bad decision-making. Your baby steps in the trading world must recognize that challenge and must address remaining issues with self-worth and money.
Learn and Practice Trading
Experience is a fine teacher. Nevertheless, you must not forget concerning additional education as you proceed with your trading career. In-person or online, classes might be beneficial. You can find them at levels starting from novice and finishing with a pro. Often, professional traders are conducting more specialized seminars. Thus, those seminars can provide valuable insight into the specific investment strategies and the overall market. Most focus on a trading technique, a particular type of asset, or within a specific aspect of the market.
For today’s session, it is enough, I think. We will continue next week.
- Trading Instrument