The easy answer here is the simulated markets! Practice is essential before trading and risking your capital.
It will take time, but it is important to select the right product to trade that suits your character and risk appetite. Do you consider yourself patient or impatient? If you are patient you will be comfortable with slow markets as well as those that move at a faster pace. However, those that are impatient will prefer the faster paced markets as they will become frustrated with less action and make impulsive decisions that will generally lead to a loss.
Different asset classes and even products within each asset class will move at a varying pace. Therefore, it is best to practice all of them to decide which one is the best match for you.
It is possible your background may influence your product selection or the subjects you studied in education.
Volatile markets are dangerous for most traders
An early warning: volatile markets are dangerous for most traders, even those with experience. These will include many of the commodity markets but also some of the financial markets such as the Nasdaq.
Foreign exchange is considered one of the slowest markets and easily available (remember, does it suit your character?). You will find it can be slow, medium, and fast, but market conditions change at any moment, so be prepared for even a slow market to react fast at times and fast markets to be slow!
If you intend to trade retail (spread betting, CFDs) through a broker, then it will reduce the strategies that are possible. If you trade the true derivatives markets, using futures and options, there are more types of trading available. The important thing is that regardless of how you trade you must control your risk in every trade.
- See our guides to the most popular markets
- See our guide to Spread Betting
- See our guide to CFD Trading
Mini and micro contract trading on exchanges
Some exchanges offer mini and micro contracts which are baby versions of the full-size contract and they are fully correlated which means they will react the same way, although as a smaller contract the risk is reduced. This is an advantage when you are first starting to trade live as you can either keep the losses smaller (but also the profits) or have the luxury of trading multiple lots, again keeping the risk exposure lower.
Mini or micro contracts may be 50%, 25%, 20% or 10% of the full-size contract…always make sure you check this out first and the tick value! Rather than one full-size contract which would mean you are either in or out of the market, with micro contracts provide the flexibility to enter the market at a variety of prices….and exit similarly, yet with the same risk or less of a full-size contract.
When you first begin trading live and risking your capital, it is more about survival than making money. Honing those trading skills and controlling your emotions are crucial to turning trading into a career and enjoying longevity as a trader.
Armchair Trader readers can currently enjoy a discount on Chris Tubby’s trading courses using the discount code ARMCHAIR5% when booking. More details on Chris’ courses can be found at www.masterc.co.uk