Are you planning to start trading? Although online trading may seem easy, it’s not. Some beginners tend to dive into the trading world without even fully knowing what it is about. Unfortunately, trading isn’t the same as gambling, so there’s a high chance that you can lose your capital if you aren’t prepared yet.
So, even if you want to try it right away, you should be patient, and learn all about the financial market, and other things about trading before you start dealing with real money.
In this article, we’ll discuss the signs that you should know when you’re ready to start trading.
1. You Understand the Basics of Financial Markets
How do financial markets work? This is the first question you should be able to answer if you’re planning to start trading. Although it’s not advisable to start actual trading once you can already answer this question, it’s still a good start.
When understanding the market basics, you should know the terms, be aware of the different asset classes (such as forex, stock, commodities), know the different factors that can affect price movements, and familiarise yourself with the trading platforms, like TradingView and MetaTrader, and the market orders.
2. You Have a Reliable Trading Plan
The next sign that can tell whether you’re ready to start trading is if you have a trading plan. When formulating a trading plan, it should include your trading strategy, entry and exit points, goals, budget, and methods to track your performance.
Having a clear trading plan allows you to have a consistent trading style, and you can easily avoid making impulsive decisions. Meanwhile, when planning your trading strategy, it should be based on your personality and the market behaviour.
3. You’ve Practised with a Demo Account
Have you been practising using your trading account? Many trading platforms, like TradingView, offer demo accounts that allow beginners and professional traders to practise. Since you don’t need to spend real money, you can test everything you need to come up with a better trading strategy and familiarise yourself with the market movements. Besides, even if it’s a demo account, the results still depend on the actual market conditions.
Once you are confident enough to navigate the trading platform, it means you’re almost there.
4. You Understand Risk Management
Although winning when trading isn’t guaranteed, you should still know how to manage the risks effectively. Understanding risk management is essential, especially for new traders. So, if you’re still not familiar with how to manage risks, you still need more time before you start trading.
In terms of managing risks, you should know how to use stop-loss orders, limit the amount you trade to prevent significant losses and diversify your trades. These are just the basics of risk management, but they can significantly help you manage the beginning of your trading journey.
5. You Can Control Your Emotions
Trading can cause a roller coaster of emotions, but it’s okay to feel things as long as you can control them. Whether you’re happy or sad, it can lead to creating emotions that can harm your trading performance.
For instance, if you experience a big win, there’s a chance that you can overtrade since you want to increase your money. The same thing can happen if you’re sad. You can overtrade just so you can at least recover the amount you lost.
So, whenever you practise trading using your demo account, think of it as the real deal. Whether you win or lose, don’t forget to observe your behaviour, and control your emotions.
6. You Have Sufficient Capital
Another important sign that you’re ready to start trading is when you have sufficient capital. Even if you have enough knowledge and skill to start trading, you can’t start trading enough money. Besides, it’s not just about the money you need for trading, you also need funds for your trading account, additional fees, and emergencies.
Even if there are ways to lessen the amount you need for trading, you should still have enough money to continue trading. Besides, if you lose, and you’re counting on wins, there’s a chance that your trading account will close if you aren’t able to transfer a sufficient amount.
7. You’re Willing to Keep Learning
If you want to become a successful trader, you should be willing to keep learning. All the things you know about trading before should be doubled the moment you start the journey, or at least close to that.
Besides, when it comes to trading, you should be aware of the current market conditions, trends, and strategies. As the trading industry evolves, your knowledge as a trader should also improve to have a better trading experience.
Final Thoughts
Trading isn’t a way to get money right away. It requires time, effort, and knowledge to become a successful trader. Once you meet the criteria listed above, that’s when you know you’re ready to take the step to become a professional trader.
ABOUT THE AUTHOR
Aliana Baraquio has over 5 years of experience as a writer and market analyst. She specialises in developing beginner-friendly trading techniques and tutorials. Additionally, she suggests FP Markets as the top broker for trading CFDs and Forex.
