If you’re looking for a way to make some money outside your regular job hours, trading on the stock or forex markets online may be the way to go.  With online trading, there are several benefits including – the ability to work flexibly, the ability to work from home, the opportunity to earn an unlimited income – as well as the satisfaction of taking control of your own future.

If you’re stepping into life as a trader, you probably already started to access the wealth of resources online – YouTube, Facebook and other social media channels all feature trading in some form.

Perhaps you’re attracted by the appeal of controlling your personal income exactly how you wish.  Perhaps you work best relying on your own initiative.  Perhaps you can’t wait to be free from the 9-5 restrictions or the long commute.  We talk to people week in week out who say they’re keen to take their financial future into their own hands.

To help get you straight into the world of online trading, here’s some guidance and thoughts to consider:

Education is key

In trading, the data available is massive.  It can be overwhelming.  You can have every single chart and indicator in front of you, but this is unhelpful, especially if you’re a beginner.  The aim is to filter the information to create meaningful data.  Quality education is key to understanding how to read, and how to filter the data accurately and quickly.  Traders talk about “analysis paralysis” which is the act of endlessly reviewing data.  A decent beginner’s trading course will cut through this process, getting you to streamline what you need, and how to interpret it.

As part of any good course, you’ll also be guided to create your own Trading Plan.  Look for courses that cover some of the fundamental lessons in trading. These can include: how to open the right brokerage account, the practicalities of how to trade, how to manage risk, how to improve the probabilities of a winning trade, what strategies to use in which situation, and more.

Through learning, you’ll be able to understand the three main aspects of trading that you can control: the entries you make, the direction of your trade – whether you are going to buy or sell, and the risk of the trade.

Beginners to trading also need to consider the two main approaches to trading: day trading and swing trading.  These approaches have different characteristics and will suit different traders depending on their goals and the time they have available.  A good coach will offer guidance and advice – enabling you to make the right decision for you.

  • Day traders aim to open and close their trades before the end of the day. For this reason, they can operate during any time period from 5 minutes to 4 hours and will often be active throughout the day.
  • By contrast, swing trading – which is more commonly recommended for beginners – operates over longer periods of time, such as days or weeks, and can be more easily fitted around a full-time job. Sometimes, it can be more beneficial to trade over longer periods of time since it gives you more time to study the behaviour of the market.

Set yourself up with the right broker

Making sure you’re working with the right broker is imperative to your success as a trader. There are plenty of different brokers in the marketplace, but it may feel overwhelming to try and choose which one would work best for you.

We recommend that you research this area well since the right broker can make a big difference to your trading.  There are differences in commissions and charges.  Make sure to seek advice from professionals since they’ll know which brokers are good.  A good broker is worth its weight in gold.

It’s important to choose a broker that specialises in the investment option that you’ll be trading in e.g. forex, stocks, etc.  Also look for minimum account sizes – and ask whether there are any account fees, and whether the broker will fit with your trading style and tech needs.

Practice, practice, practice

When you first start trading, it’s advisable to use a demo account so that you can practice your skills and strategies on the market, without the risk of using your own money. When you set up your brokerage account, you can choose to use a demo account that can be topped up with “money” and can be used to test your new skills, understanding of processes and trading strategies.

Your main focus will be on finding trends in the market. As Greg Groenewald, mentor at Trading College, states “the trend is your friend”.  You want to stay in a trend for as long as possible while it is trending to maximise your success. Trends can last for variable periods of time, from a few hours to days, so it is important that you keep an eye on how they are behaving.

There are trading systems available to help you to identify trends and to anticipate when the market could change in its behaviour.  An alerts system may also help you.  For example, Trading College use a system called The ProTrading System, which uses indicators that find and identify patterns in the market.

You may wish to practise one strategy and master that, before moving onto the next.

Develop your mindset

Greg Groenewald, mentor at Trading College, believes that the most important skill of all to develop, when learning to trade, is controlling your own mindset. He states that one of the main mistakes that beginners tend to make is “focusing on the strategy but overlooking the mindset”.

As we’ve said, a demo account is a great way to learn the tools of the trade, but one word of caution – your mindset is likely to change as you shift from the demo to the live account.  When trading through your demo account, you may naturally be bolder. You got nothing to lose! You may find you have a little less respect for the money you’re trading with, since it isn’t ‘real’ money. You may be less worried about losses, and less excited by wins. Your emotions will be flatter and you’re less likely to cogitate about your trading day. You’ll move on quickly.

From our experience, when you shift onto the live account and begin trading in live markets, you’ll have to work harder to keep your emotions under control. It’s all about being objective. If you believe in your strategies, then it’s about letting the probabilities play out. But of course, as it’s your own money in play now, the decisions you make will inevitably clouded by judgement and emotions.  Traders talk about ‘fear’ and ‘greed’ as two key emotions to keep in check.

Refine your strategies

One way to control your mindset, is to be absolutely certain that you have faith in your strategies.  Your trust that your strategy will work say, 70%, 75%, or 85% of the time, means that you will be better able to see beyond a series of losses.

Back-testing can be a useful exercise for securing that trust.  Back-testing involves applying the strategy to a series of past trades, to predict the potential results in future.  You want a high percentage of winning trades – probably 70%, but the higher the better.

Now, when you go through a period of limited wins, you can objectively decide whether you need to change your system or strategy, or whether to trust in the strategy you’re using knowing that the probabilities need to play out.

As you grow in experience you’ll have strategies for use when the market is either trending upwards (known as bullish trending) or trending downwards (known as bearish trending). If you have achieved the cool-headed traders’ mindset and have a mentor for the advancement of your education, you can refine your techniques and strategies for the very best chance of success.

If you’re looking to step into the world of online trading, we’d like to help. We offer both courses and mentoring opportunities to help you trade with skill and confidence. Come along to our free* Learn to Trade Live one-day course on Saturday 17th November in Manchester, or on Saturday 1st December in London, to really get your foot in the door!

*You will pay a £50 refundable deposit to secure your space for the course, which will be refunded 48 hours later as long as you attend.

Further Reading:

How to deal with losses when trading

Forex trading for beginners – Five things you must know