Requirements for trading

In this post I will talk about the three main requirements for trading.

• Capital
• Time
• A good Broker/Dealer

Capital

You can start trading with as little as £20, but I wouldn't recommend it.

With traditional investing, the more money you have the higher profit you can make from your investments, as the return is proportional to your capital used. It means that the more you invest, the less the equity's (or any other financial product) price needs to change proportionally to cover your transaction fee

With spread betting you must provide some deposit for your margin requirements, which vary with product to product. Beyond this, you can provide as much capital as you want to your account, however again like traditional investing, the more the better. Whilst ideally you should never need it, larger stop losses can prevent you from losing any money at all. Many times I have hit my stop loss due to limited account funds and then moments later the price has shot back up to where I wanted it. But although a larger stop loss would have prevented this from happening many times, there have been occasions when the price hasn't gone back to where I wanted it, and the closer stop loss has prevented me from losing more money. So again this needs to be looked at a case by case basis.

The main rule which I'm sure you will have heard before is "Don't bet what you aren't willing to lose".

Time

Investing in financial markets can take up a lot time. This time should be used for analysing potential investment opportunities, managing your portfolio, and keeping up with the market. The more time you give your investments, the better you will do.

A good Broker/Dealer

There are a lot of different Broker/Dealers out there. As a spread better I look for the dealer that can give me the tightest spreads and lowest minimum stakes. When looking for traditional investment brokers the main you should be looking for is a small transaction fee.