Stocks are looking to close the week in impressive fashion (all-time highs).
Have you been able to participate during this market rally? Or Have you been on the sidelines?
Now, I’m not really concerned if you’re losing or making money in the market… the fact that you’re trying means a lot.
You see, there was once upon a time where I didn’t want to burden or stress myself out with my money… so I gave it to a financial advisor, a professional, to look over my money and help me beat the markets…
Well, it didn’t work out as planned. And instead of helping me build wealth into my retirement years…I lost 50% of my account in one year.
Which forced me to learn a hard lesson…
(If you haven’t read my section in the Millionaire Maker Blueprint, click here to get your copy)
If you need something done right, you’ll have to do it yourself. While I’ve amassed over $2M in career trading profits (after my broker nearly lost it all), I can’t click the buttons for you.
The first step for you is accepting responsibility for your financial future. Forget about mutual funds and financial advisors… it’s time to roll up your sleeves and start taking control.
That said, today I want to layout some of the first steps you’ll need to take as you begin your journey to becoming a profitable trader.
Now, no one is going to protect and manage your money like you would. You see, before I learned to start trading my own money… I had a financial advisor. Everything was fine and dandy… up until the financial crisis. In just about a year, my financial advisor lost 50% of my portfolio.
You’d think he’d at least tell me what was going on, and try to protect my portfolio against losses, right?
Wrong. Not one peep from my advisor… and they didn’t try to do anything to at least stop the bleeding.
After that, I said enough was enough… and I took matters into my own hands.
Now, I didn’t just start trading… I knew there were necessary steps to take before I started to put real money on the line. That in mind, I’m going to show you the steps I took to put my portfolio back in the green… and turn it into a 7-figure trading account.
Step 1) Choosing the Right Broker
When you’re looking to start taking control of your money, you’re going to need a broker. Now, there are a lot of brokers out there with professional platforms… so you’ll need to conduct your due diligence.
For example, some questions you would want to ask before selecting a broker are:
- Is this broker reputable? Do a lot of traders use the broker and have there been any problems in the past – like having problems getting your money out?
- What trading platforms do they offer? Do they have mobile, web, and desktop platforms so I can check on my trades at any time?
- What are their trading commissions? Do they charge you a flat fee, or is it based on the amount of shares I trade?
- Are there any other fees I should be aware of?
- What’s their account minimum?
- Do they let you paper trade?
Some popular and reputable brokers include TD Ameritrade, E*Trade, and Interactive Brokers. Ultimately, you’ll need to see which platform and fee schedule works best for you.
Step 2) Setting Up Your Chart Layout
Once you’ve found a broker, you’ll want to start tinkering with the platform and set it up to fit your style.
Now, what I found that a lot of traders have a problem doing is setting up their charts properly… more times than not, they put short-term timeframes, watching the stock move tick by tick. Well, if you’re planning to use technical analysis, it’s better if you look at longer-term timeframes – like the daily chart.
What I like to do is put moving averages on my charts (your brokerage platform should allow you to plot moving averages). If you don’t know what moving averages are, they’re simply lines that plot the averages of prices over time. For example, the 20 simple moving average (SMA) will plot the average prices of a stock or exchange-traded fund (ETF) over a 20-day rolling period.
There are also exponential moving averages (EMAs), which place more weight on recent price action.
The whole idea here is to use these averages to spot the trends, and potential shifts in trends.
We’re going to keep it simple and just plot the 20-period SMA.
Check out the daily chart of Twitter Inc (TWTR).
Do you notice something above this price action?
Well, it’s pretty simple… if a stock is trading above the 20-day SMA… it means it’s trending higher… if it’s trading below the 20-day SMA… it’s trending lower.
However, you’ll notice there are some periods where it’s choppy trading, and you can’t really see the trend.
What you want to see is price break above, and stay above the 20-day SMA… once it gets close to the moving average, you could look to buy… and stop out 2% below it.
Step 3) Paper Trading
Now, once you’ve got your charts set up, you’ll want to get a better feel for your platform. With this step, you’re going to want to paper trade… the last thing you want is to start trading real money with a new broker and platform.
If you don’t know yet, paper trading simply means you’re trading stocks with “pretend money” with real-time data.
You might be thinking, “Well Petra, if I paper trade… I won’t be able to make money.”
That’s okay when you’re starting out. The point as a beginner is to learn to protect your money and develop a process. With paper trading, you can test different strategies… and once you’ve found one that fits your personality, you can practice trading the strategy with paper money.
Once you’re comfortable entering order types, and show your strategy makes money while remaining risk-averse… then you can consider starting to trade small.
Seeking Education and Defining Your Style
When you’re paper trading, it actually helps to find a mentor… someone who will hold your hand… answer your questions… and give you useful trading tips.
You don’t want to go at it alone when you’re first starting out. I can’t tell you how many times traders have come to me… trying to trade their own money, while just learning on their own… it typically doesn’t end well.
Not only that, they’re trying different styles of trading… and can’t stick to one.
Basically, before they even discover themselves as a trader and define their style… their accounts have dwindled.
One question you should ask yourself is if you need action, or if you’re into base hits?
For example, my trading strategy doesn’t involve swinging for the fences every time… looking for action. I’m into protecting my money and just getting base hits. Now, what do I mean by base hits?
Well, my trading style involves chart patterns – like the rounded bottom breakout – and all I’m looking for is small winners, while only risking 2% of my account for any given trade. When you’re able to consistently take base hits, they actually add up. When you build your account with base hits… you’re able to start risking more – even when you keep the 2% risk rule… and ultimately, the dollar returns get bigger.
If you’d like to keep the learning going over the weekend, make sure to check out my Top 10 Trading Tips video series, it’s the advice I wish I got when I first started trading and something I’m happy to share with you.