This guide is going to give you everything you need to understand and get started with online trading.
Nearly all trading is done online these days. The days of trading on a trading floor are gone. You do not see ‘pits’ like this anymore:
Computers have made this type of floor trading redundant. Computers are faster and can do more than humans. This type of automation and replacement has been seen across many industries across the world.
In our case automation is great and has only benefited us. It means we can access the world’s markets from anywhere we want to. As retail traders (traders who are going to Spreadbet or use CFDs) we now have every opportunity to make great profits from trading without the historic disadvantages. We now have near-instant online executions (how fast our trades are opened and closed), really tight spreads (the difference between the prices we are able to buy and sell the market at), charting and technical analysis at our finger tips.
It’s a very competitive environment which means the brokers we are able to use having to give us the best service if they want our business. Speaking of brokers…
We need a broker to be able to trade. You may think of a broker as a a human who is going to place trades for you. Again, this process is fully automated these days so the broker is just providing you with an ‘execution only’ service. There are the things you need to consider when choosing a broker.
There are plenty of legitimate brokers, but there are lots of scammy off-shore ones you shouldn’t go anywhere near. You need your broker to have a licence/s with the likes of the FCA, CySEC, FSCA the ASIC. This ensures they properly regulated and governed, and that your money is protected. One of the biggest worries people have with brokers is whether or not they’ll be able to withdraw their money. With a properly regulated broker, this isn’t an issue. Your money will be in a separated bank account, and depending on the licence, insured.
The licences should be clearly displayed on the broker’s home page. If you are having to dig to find them, then that is a red flag as it means they probably don’t have one. Have a look at the broker we use and work with – Markets.com – to see how prominent the licences should be. They’re all in the top left corner.
We use MT4 to trade with. It can seem a little over-whelming when you first download it, but once you get the hang of it, it becomes intuitive and easy. If you want to know more about MT4 when we have a comprehensive step-by-step guide which will teach you everything you need to know about it here.
The best way to get a feel for a broker is to open a demo account with them. Whether that’s using their web platform (if they offer one) or MT4 above. You will get a feel for the executions (how fast you trade is entered) and other aspects which contribute to the ‘feel’ or a broker.
It’ll feel different when you move on to using real money (due to trading psychology), but the most important thing at the beginning stage is to learn about the mechanics of trading. Selecting the markets, opening and closing trading. Using orders like stop losses and limits etc.
You can open a demo account here.
Ok, so let’s get into some practicalities with online trading.
First of all your setup. Brokers have made apps for phones and tablets that make trading look simple and easy. Let me give you a reality check. No professional trader trades on their mobile or tablet. Yes, these can come in use to monitor and manage trades, but it terms of analysis and trading in a professional environment, then a multi-monitor setup is what you need.
Here is my setup:
Ok, I’m joking. That’s not my setup, but that gives you an idea of what setups professional traders use.
You don’t need anything quite like that, but you can see it’s somewhat away from a mobile or tablet. This isn’t having a ‘cheeky’ weekend gamble on the football (though some brokers love to advertise at football games), this is serious business which can cost you serious sums of cash if you do not take it seriously.
I run have three 26 inch monitors linked to a desktop PC. It’s perfectly possible to use two, but it’ll ultimately depend on how many markets you want to monitor and what sources of information you additionally want to monitor e.g. news feeds.
MT4, as we mentioned earlier, helps compress things as it contains the charting and the ‘deal tickets’ (the tickets we use to take the trades) are contained on one screen.
Basically, you don’t want to be fiddling around when you are needing to do analysis and making important decisions.
Your online trading routine needs to be based around your lifestyle and circumstances. It’s no good trying to day trade if you’re working a 9-5. You’ll be much better off learning to take longer-term swing trades.
You can make profits on both short and longer-term trading, so it’s about selecting what’s right for you. Day trading is intense and requires a lot of focus in the appropriate environment. Trying to scalp whilst doing another job or on a mobile / tablet won’t work.
You can’t trade if you don’t have any trading strategies which you will use to make you profits. Lucky for you we have two large blogs on two highly profitable trading strategies you should read after this post. We mentioned our swing trading strategy earlier as well as a scalping, but we also have breakouts and Forex ‘fakeouts’.
That’s quite a few, so allow me to provide a summary here and talk to you about how they become the foundation of your online trading.
Firstly, if you’re not familiar with the basics of support and resistance then you should read-up on that as a lot of our trading is based upon support and resistance.
Swing trading is where the market swings from one zone (usually identified by big, obviously support and resistance levels) to another. These trades are typically taken on longer-term time frames and will last days. These are more suitable for traders who may not have as much time to sit in front of the markets. These trades are really suitable for beginners (of course professionals use the strategies, too), as most beginner traders will have less screen time.
Another advantage with these trades lasting longer is that they are perfect for a trader’s development. Most traders start out day trading and end up using too much leverage and taking far too many traders (over-trading). This usually leads to them blowing their accounts as they don’t have the strategic nor psychological skills to trade quickly or frequently.
Taking fewer, longer-term trades means a beginner traders has more time to make critical trading decisions and will feel less pressure or rushed.
Each one of the candles sticks below represents a day, so you can see how long these types of swings typically last.
Breakouts can evolve into swing trades, but this is more advanced than we need to discuss here so let’s keep things simple. Breakouts are usually breaks of support and resistance where the market will enter a new trading zone. Compare that with traditional swing trades that are trading back across existing zones.
Breakouts can be traded on different time frames. That means you could in a trade for days and weeks, or in a trade for minutes. Breakout patterns occur on a very regular basis across a vast range of different markets and trading instruments. The example above is an hourly time frame so each candle is an hour.
Our recommendation for beginners is once more to look at longer-term breakouts and work down to trade quicker trades as your experience grows and you develop as a trader.
Scalpling, exciting and potentially highly profitable!
It’s also rather high risk.
Yes, all trading is ‘high risk’, but this is tightrope-between-skyscrapers-when-windy high risk. High leverage and quick moves are a recipe for disaster for an amateur trader. The main risk being that if the market moves quickly against them they usually won’t take the loss. That small, managed loss suddenly and quickly becomes and ‘uncontrollable’ loss that they very quickly lose control of. Many trading accounts have been blown in this manner.
A lot of traders who are beginners are attracted to this type of trading that can last seconds but usually (for what I consider to be scalping on a CFD or Spreadbet platform) a few minutes. Usually taking 10-50 points / pips depending on the market which is being traded.
Our YouTube scalping course is an hour long but it teaches you the techniques I’ve been successfully using for years. It’s something we encourage traders to learn, but it needs caution as it needs rock solid trading psychology.
This quite a specific strategy but it is very effective on the Forex markets. Again, we are looking at our support and resistance levels as the key areas to trade from. Let’s take an example:
So here we have major support and the GBP/USD currency pair. The horizontal blue line indicates this to be the case. So what we are looking for her is for the market to go below the level and then pop back above it (back below if looking at a fakeout on resistance where we’d trade short).
Once it does come back above the level, we then take the trade. We have this opportunity because the Forex markets love to test new areas and ‘trick’ people into taking trades that look to benefit from a move into a new area. After people have taken their positions, it then reverts and puts them into losing positions.
If you understand these moves you can benefit from them as we do with our Fakeout strategy.
The chart below is the same as the above but zoomed into a daily time frame to show the exact candle we’d aim to enter the trade on. This is a really important online trading strategy to add to you trading arsenal.
So online trading needs strategies and I’ve just given you four that you can use for your entire trading (they’re the ones I’ve been using for over 10 years).
Along with strategies, there is another essential aspect to trading.
Trading psychology is absolutely essential. You can have the best strategies in the world but if you do not execute the trades properly and stick to your trading plan, then you will fail.
The biggest cause of trading failure is a trader not being able to take a loss. Beginner traders will do anything to avoid a loss. This includes moving their stop losses, adding to losing positions (martingale trading – terrible!) and searching for a magic combination of indicators to try and find a system that means they will never have to take a loss. No such system exists so don’t even try.
Working on trading psychology isn’t the most fun thing to do compared to other aspects of trading aka strategies and actuality trading.
The problem is without good trading discipline and a professional’s mindset, you have no chance of succeeding. This is why when we teach and show people how to trade we provide them with our 7-part trading psychology course. Just don’t remind me too much of it as I had to write / script 50,000 words to get it right!
Never has there been a better time to start off trading online. We have access to all the markets we need. We have access to highly competitive brokers that make it great value to trade and we can do this all from home.
Do you have any questions about this article or anything else trading related? If so contact us on WhatsApp or Telegram below.
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Learning to trade, trading courses, it’s all a bit of a nightmare, right? How many courses are there out there? About 5 million the last time I counted…
How do you decide how you go about learning to trade and what (if any) trading courses you take?
In this article I’m going to talk you through what you need to be looking out for and what you should be avoiding when seeking your trading education.
Our inbox is always full of inquiries wanting to know what are the best trading strategies and roughly two thirds of these inquiries will mention one of the 3 P’s. These aren’t the famous marketing 3 Ps – Promotion, Position and Price, the 3 P’s we always get asked about are Pips, Points and Profit.
People bang on about price action trading a lot. The reality is very few people actually understand what it is. What’s even worse is a lot of those who claim to teach it only have a partial understanding. There are more facets to understanding price action that most people don’t know and are never taught.