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How to Get Started in Trading

By: , dated May 14th, 2012

With the recent advances in communication technology and the advent of the Internet, anyone with a computer, a nominal amount of funds and a reliable Internet connection can get started in trading. Before the Internet, electronic trading was already being used by large brokerage firms and other financial institutions.

Once electronic trading became available on the Internet, literally millions of people were given the opportunity to trade via their home computers. To get started in trading nowadays is much easier than what it used to be.

Know the Market You Plan to Trade

Before you decide to open an account and begin trading, you should first have an idea of what exactly you want to trade. The most accessible market at the moment is the foreign exchange market, but stocks, options, ETFs and commodity futures are also tradable via the Internet.

Opening an online forex account can be done with as little as $25. Positions in the forex market are generally highly leveraged with the position starting out as an exchange of equivalent securities. Once the market moves away from the initial exchange rate, profits and losses accrue.

Trading stocks in an online account can be a bit more complicated, with stock positions being leveraged by two to one or a 50 percent margin. Most commodity futures are leveraged by five to one or 20 percent margin.

After Selecting a Market

Forex positions are the cheapest to initiate with the highest leverage, nevertheless, higher leverage means higher risk and your entire initial investment can be wiped out very quickly with one adverse market move. Commodities and options, while appearing to carry a lower degree of initial risk than forex positions can also be extremely risky.

Stocks, on the other hand, tend to move more gradually, which is the reason many people choose stocks as an investment vehicle. Regardless of the market you plan to trade, you will have to first open an account at a brokerage.

Most stock, forex and commodity brokers give their clients an online trading platform that generally includes a ticker, market news and some kind of technical analysis software. Trading can be exciting, nerve racking, fun and heartbreaking, so learn as much as you can both about the market you plan to trade before jumping in.

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This article was brought to you by the InvestorGuide Staff Writers and Editors.

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