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1. Decide which trading style is right for you, as there are multiple trading styles that fit different types of people. Fundamental trading focuses on the company as a whole, such as quarterly earnings and management. In contrast, technical analysis focuses on the trends and signals from the chart. Position, momentum, swing and day traders concentrate solely on technical analysis. Position trading relies on weekly charts, and position traders hold onto securities for months. Swing trading is based on four-hour charts, and swing traders hold onto securities for days or weeks. Day trading focuses on one- to five-minute charts, and day traders close out of all their positions before the end of the trading day. Momentum traders concentrate on the volume as well as one- to five-minute charts of the company and rarely hold a security overnight. Scalping is trading through taking advantage of the difference between the bid and ask in order to make a small profit.
2. Visit your public library to further your knowledge of trading. Historical books about Wall Street provide a more comprehensive view of the development of past trends. Knowing the development of past trends provides a more accurate speculation of future returns. Biographies of famous traders such as Jesse Livermore, William O'Neil, Warren Buffett and Jack Schwager are helpful in discovering the psychology of trading. Learning the psychology of trading helps minimize losses through knowing how to trade without emotions.
3. Enroll in an online trading class to further your knowledge. The market is constantly changing, so books about various trading styles are not applicable after a few months or years. Classes and seminars show present-day strategies and do not rely on old techniques. Thoroughly research the instructor or company before signing up for a seminar or class. TimothySykes.com has been coaching successful traders for over six years through seminars, DVDs and classes. Sykes offers multiple online seminars throughout the year. TradersExpo.com also has various prestigious speakers and trading classes.
4. Begin paper trading with the knowledge you have gained from the books, classes and seminars. Paper trading is virtual stock trading; no actual shares are exchanged while paper trading. Many websites and online brokers offer free paper trading accounts. You fund your paper trading account with a figurative amount of money. When you want to buy or sell a stock, record the amount of shares and the last price the stock was traded at on a piece of paper or through an online paper trading account. Record your total gain after each transaction. There is no risk with paper trading, because only virtual money can be gained or lost. The quotes for online paper trading are delayed, and the orders are not transacted through an electronic communication network (ECN). Online market orders can take minutes to be transacted, however paper trading transactions are instantaneous. Thus, paper trading results are not entirely indicative of future results. However, paper trading provides insight into whether the particular trading strategy being tested is profitable. In addition, paper trading enables you to make more money by preventing the inevitable initial losses associated with new strategies.