Tuesday, 22 March 2011

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.

30 comments:

  1. Definitely don't bet what you can't lose and don't invest blindly.

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  2. This is really interesting. I don't know if I could risk it though! Haha.

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  3. As a beginner investor I'll be following your blog with great interest!

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  4. This is one of the most interesting blogs I've stumbled across.
    Keep them coming!

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  5. What Oscar said...this was a worthwhile read.

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  6. Thanks for advice, i shall make use of this :)

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  7. is a broker really needed?

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  8. wow really interesting thank you

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  9. @Janez Yes, although when people here "broker" they think of an individual broker, but I mean it in a more general sense. I for example, use my HSBC account to trade traditionally as they provide a brokerage function.

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  10. Good advices my friend. Tell me more about it on faceb. see you

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  11. I have a degree in Finance, those are some good tips. I'm interested to hear about how trading differs across the pond. +followed

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  12. Very interesting. I have been meaning to invest in the stock market for a while now. I may get into it through online services! Following

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  13. peps rly need to use theirs brains while trading.. followed to see what is next :)

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  14. This is some really good stuff. Easy to read, too.

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  15. This makes me want to get into trading

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  16. Good advice there, may prove useful :) also followed!

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  17. Thanks for this very useful informations! Looking forward to read more posts from you

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  18. good stuff, thanks for the information!

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  19. This was actually pretty interested. Nice!

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  20. I need to start with that.

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  21. Definitely a great set of tips to newbies to the world of financial investments :)

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  22. Very interesting read. Good to know.

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  23. Good tips was just going to start on trading from home definitely helpful

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  24. really good post. super informative.

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  25. I'm gonna try to start trading too, thanks. I'm following! Check out my blog at: alphabetalife.blogspot.com

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  26. Interesting, what amount of money would you recommend starting out with?

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