These are suggestions on how a person can learn how to trade.
1. Read information from the ASX (www.asx.com.au) – heaps of excellent information plus company information, data etc etc. Attend any free seminars that are available.
2. Join forums like this one and read, read, read.
3. Use the SEARCH function on the forum. The question you have has probably been covered already.
4. Get a few books on trading (Bedford, Tate, Guppy et al) (again search the forums for other peoples opinions on the best books). Buy them or check out your local library.
5. Take notes to help clarify information you have gathered.
6. Search the net for abundant information (you nearly don’t have to buy any books). Nearly every site will give you a new snippet of information, which adds to your education (even the commercial ones).
7. Sign up for free reports, stock tips, articles, news – DON’T buy or sign up for anything yet.
8. Join a local trading group/club if available. Talk to people and discuss what you have learnt and what they know (of course you still need to assess the information).
9. Start developing your own system – how to be profitable (expectancy), how to select the trade, how to determine the amount to be invested, how much to risk, how to enter the trade, how to manage the trade, how to manage the risk, how to exit the trade and how to spend your profits (think positive!)
10. Look at derivatives (options, warrants, indexes etc) to broaden your education.
11. Do this for at least 6 to 12 months (don’t be impatient to start trading – all the good opportunities will still be there).
12. Paper trade if you think you will benefit from it. Opinion is split as to the benefits of paper trading but I think it is up to each individual to decide.
An alternative to paper trading:
This requires an amount of at least $1000 - $2000.
THE NAME OF THE GAME IS TO STAY IN THE GAME (PROTECT YOUR CAPITAL!!!).
a) Invest in “Blue-chip” stocks less than $10 using the skills you have learnt in the last 12 months.
b) Invest $100.00 or so at a time (10 x $10, 12 x $8, 16 x $6, 20 x $5, 25 x $4
50 x $2).
c) Brokerage will kill you - $20 in and $20 out (total cost of buying and selling a share $40) but you will get in up to 20 trades.
d) This is the cost of your education and is cheaper than buying a system black box or attending a $4000 course.
e) You will feel the pain of losing real money but you will have gained some great knowledge about real trading.
f) Analyse where you went wrong or why you succeeded.
g) Ask for help if you don’t understand where you went wrong.