So below is the list of steps (in order) I did before graduating to a real account. I learnt most of this stuff through YouTube and other free online resources such as Investopedia. Some of you may prefer buying an online course and that is fine too.
- Learn the definition of day-trading
- Understand the difference between day-trading/swing-trading/investing etc.
- Understand the Terminology
- What is a stock/share?
- The Market
- Market Makers
- Stock Exchange vs Stock Index
- What is the difference between going long & going short
- Understand the PDT rule
- What is and how to read a stock quote?
- Stock characteristics
- Range/Average Daily Range
- Outstanding Shares
- Market Cap
- Visualize and understand stock charts
- How to read stock charts
- What is a candlestick chart
- Learn some basic technical indicators (just stick to the basic ones)
- Break-out & Break-down
- Support & Resistance
- Simple Moving Average (SMA)
- Exponential Moving Average (EMA)
- Volume Weighted Average Price (VWAP)
- Relative Strength Index (RSI)
- Learn what is Level 2 and Time & Sales – this deserves to be step on its own
- What is Level 2
- Thick and Thin
- 5 cent tick rule
- Amount of buyers and sellers
- Hidden Orders
- Stacked Level 2
- Hitting the Bid/Ask
- Market Makers
- Understanding Order Types
- Limit Order
- Market Order
- Stop Orders
- Stop Limit
- Stop Market
- Trailing Stop
- a) Brokers (This is definitely not the first step). Choosing the right broker is difficult. Set-up trial accounts in many to test and learn each one. Figure out which ones you prefer and which ones work with the overarching strategy you want to work with. Some popular ones are:
- ThinkorSwim platform by TDAmeritrade
- Tradestation platform by Interactive Brokers
- E-trade (I do not know their platform name)
- DAS Trader platform – Many brokerages use their technology and their trading platform. (SpeedTrader and SureTrader)
Each broker has unique characteristics. Each broker is unique in its strengths and weaknesses. Below are some things you have to consider in each broker:
- Type of accounts – Margin/Cash
- Short List
- Charting Interface
- Ease of entering a trade
- PDT Rule
- Minimum amount to open an account
- Level 2 quotes
- Order Types on offer
- Hot Keys
b) Trading Strategy & Trading Resources
Choosing a basic trading strategy is important. This can change as you learn more and move forward in your trading journey but having one to start of with is necessary. Do you want to become a swing trader/a day trader/a momentum trader/ a technical trader or an investor? There may be overlaps and you do not necessarily have to just choose one. However you must choose a basic overarching strategy. It also goes hand-in-hand with deciding a broker. What markets do you want to trade in? OTC markets or Nasdaq for example.
Search for trading resources on the internet. Find out some free scanning tools you can use to build a watch-list of the stocks you intend to trade for that day. Find news websites that can identify catalysts. Below I have a list of some that I use. Websites come and go so be weary of the time I wrote this article.
https://www.trade-ideas.com/ – I pay for this scanner. It’s a tool that assists me to find the trading set-ups I need for my strategy. Don’t feel like it is a must have tool.
7. Paper Trading & Trade Journal & Trade Set-ups
I suggest paper trading on the platform you intend to use when you open up an account. I paid for my paper trading subscription. It is worth it. Learn how to setup your layouts, learn how to place orders quickly and efficiently, learn how to go long and short. Understand the speed of the markets. Get a feel of volatility. Practice risk management. Keep a journal or spreadsheet of all your trades. This will help you identify what type of trade set-ups work best for you. It will help you manage risk better and give you stats of your weaknesses. Also use it to get a feel of your accuracy, win-loss ratio, average win vs average loss, etc.
This step requires the most studying, the most preparation and the most patience. See and learn from trading teachers. Understand trade set-ups and practice them. Find out what works best for you. It is quintessential to have a trading plan. Without one ALL TRADERS WILL FAIL. Learn how to scan for the right stocks you wish to trade. Practice Practice Practice. Minimum 1 month. (I have been doing this for around 2 months +)
8. Open up trading account
This is the step that I am at right now. The learning does not stop here, in fact learning will be continuous in the journey of trading. It will never stop as the markets continue to change.
Also, opening up a trading account is really just the beginner step in your trading journey. I intend to practice with small size and learn about the emotions of putting real money on the line.
It is going to be hard. I may not be profitable immediately. I may lose all the money I started with. Yet I will continue to fight!
I think its important to know these things before and accept them as a very real possibility before opening up a funded account.
Good luck lads,lasses, aunties, uncles, chickies, wankers, birds, bosses, ladies, gentlemen and gentleladies. I hope you guys enjoy following my journey and learning with me.