If you are considering trading the capital markets, there are several things you should know before you pull the trigger on your first trade. First, you need to have a good handle on a potential trading strategy as well as the risk management you plan to use. Second, you should know how to use the trading tools that your broker offers as well as how to test those tools in a real-time setting using a demonstration account. Additionally, you should be familiar with any regulations surrounding the instruments that you plan to trade.
Your Trading Platform
One of the first steps you should undertake is to perform some due diligence on a trading platform. There are dozens of capital markets brokers offering trading platforms that facilitate the investment process. Each trading platform is slightly different but they all usually allow you to execute trades. Some platforms are very intuitive, while others are a little more complicated.
In addition to an execution platform, you want to make sure that you choose a platform that provides several other tools, including an education portal, a demonstration account, an economic calendar, and a suite of technical analysis tools.
Before you pull the trigger on a trade, you should spend time learning about the different markets the provide you with investment opportunities. This could include the forex markets, the commodity markets, including gold trading, the equity markets including indices, as well as the cryptocurrency markets. Your broker’s education portal will have several articles and videos about topics that are pertinent to investing in securities. You should spend time learning about the different types of securities that are available including products like contracts for differences (CFDs), exchange-traded funds (ETS), and shares. Some brokers offer futures contracts which are the right to purchase or sell a security at a future date. There are plenty of free resources that you can use to educate yourself on different types of investments.
Using an Economic Calendar
Once you feel you have a handle on the different securities that are offered by your broker, you should begin to determine why and when these securities move. A great resource that you can use to help you find new information is an economic calendar.
There is an important concept that states that all the available information is incorporated into the price of an asset. When new information becomes available, the price will move to reflect the new information. One of the best ways to track new information is through an economic calendar.
An economic calendar is like a regular calendar and shows you the data that will be released on a specific day. In addition to reflecting the data that will be released, most economic calendars provide traders with an estimate of what is expected and compare that to what was released in the last report. The economic calendar provides you with macro information that can be market moving. This occurs when the data that is released is unexpected.
Learning About Technical Analysis
The new data that is captured in the economic calendar provides one piece to the puzzle that gives you clues to the future price movements of an asset. Another part of this puzzle is where prices have come from. Many investors use technical analysis to determine future price movements. Technical analysis is the study of past price action and helps generate information that will give you a guide to where prices are going. You want to make sure that your broker has a full suite of technical analysis tools that will help you determine future price movements.
Using a Demo Account
The combination of technical analysis and fundamental analysis, which includes the use of an economic calendar can help you develop a trading strategy. One component that you need to add is risk management. This describes how much money you plan to risk on a trading strategy, and how much you plan to risk on each trade. It is especially important to have a plan before you begin to trade to avoid getting into a situation where you do not know what to do.
To test drive your strategy, you should use a demonstration account. This is an account that allows you to test your strategies in real-time without having to risk real capital. Your broker will provide you with an account that uses demo-money instead of real-capital but will allow you to trade in real-time. A demo account also will allow you to test the execution module and make mistakes without risking real capital.
The Bottom Line
Before you start to perform your due diligence on your potential broker’s platform, make sure the products that they are offering are regulated by the country you are domiciled within. You can then go through the process of learning about the markets, evaluating the education and technical analysis tools, and test driving the demonstration account to see if the platform is right for you.