How to start trading stocks, Forex, futures, CFDs and other instruments

Several readers sent me questions like “I started trading CFD. I need more tips and warnings because of possible big losses. Care to offer some advice?”. Or “How should I start trading stocks?”.

It is very important to think about the steps you have to do before you can really start to trade stock markets and make money. Many people think that it is easy as you need only to open a brokerage account and buy some shares. Most of these “traders” finish with huge losses.

You have to spend some time with learning how to trade stocks first. Or you can start to make real trades immediately without spending time with learning. The second option will cost you much more money than the first option.

Steps to learn how to trade stock profitably

You can divide the time needed to learn profitable stock trading to several parts.

step 1 – Your time for trading

Decide how much time you can use for stock market analysis and also for real trading.

The stock market analysis is done typically when the market is close – it is the way I prefer. But you can do it also when the stock market is open. And currency market, Forex, is open 24 hours a day, so you analyze situation always during currency trading hours.

step 2  – Trading style selection

Decide what trading style you will prefer. Consider the time you have based on step 1 and also consider your own emotional state and personality. If you are able to make a quick decision, you can day trade stocks or currencies or derivatives like futures with trades lasting minutes or hours.

If you need some time to analyze the situation and make a decision, you have to use swing trading or position trading style. These trades last for days (swing trades) for weeks or months (position trades).

step 3 – Learn technical analysis and how to use it practically

Every trading style mentioned above prefers to use technical analysis as the main tool for making decisions. Fundamental analysis cannot be used as the main tool. You can use fundamentals only as minor additional hints for your strategy.

Therefore, you need to learn technical analysis and master it. Do not complicate it. Learn the most important basics and stick to them. Here is a chart I use for my trading analysis:

Support and resistance are two the most important terms you need to know and use. Then you need only few additional tools. You can learn how to use technical analysis to find actual stock market trend. It is an important skill for profitable traders.

step 4 – Create trading strategies you will use

There are many trading strategies that are profitable. Momentum strategies, Breakouts, pullbacks, range trading. Find the ones that fit with your personality, your expectation, your time schedule.

Create a process for stock picking or stock selection if you plan to trade more stocks.

step 5 – Practice selected strategies

Do not try to trade strategies immediately on real account with real money. A preferable scenario is to make paper-trading first – yes on real paper or using a demo account. When you will be familiar with the trading and you will see that paper trading generates money, you could move further.

Now you can open a real account and start trading stocks. Start to trade small size – like 10 shares maximum. Consider discussing your trades and analysis with other traders. You can also subscribe to free or paid trading newsletter or membership sites.

My private trading club is such a membership site where I describe and discuss stock picks, chart analysis, market trends, trade setups. You can start trading stocks with my tips and improve more quickly.

step 6 – Slowly increase position size

As you will be more and more familiar with stock market and trading, as your trading and profitability will be improving, you can slowly increase position size. Now you trade for profit and to make money.

Final recommendation: Take as much time as you need. Be comfortable in this process. Do not stress yourself to make living from trading from the beginning.