As a short term trader, you have a lot of choices in front of you. There’s the Forex market, you can day trade stocks, there are binary options, there are spreads and CFDs, and a host of other types of trading instruments that you can choose from. How do you choose which is best for you?
This brief guide is designed with the hopes that you can be a little bit closer to figuring out where to trade. Feel free to investigate any of these concepts in more detail on your own as you shape your decision.
First Things First
How much money are you going to trade with? If you have only $250 to set aside for this, you will naturally have fewer choices than if you are setting aside $100,000 for this. The amount that you trade with should be your first consideration then. The more you have, the more choices you have. For example, you cannot even consider day trading stocks in the traditional sense unless you have more than $25,000 in your margin account. Once your account falls below this number, your day trading ability will be suspended. We recommend having at least double this number before you attempt to day trade.
Smaller traders will find better benefits coming from binary options, CFD, or Forex trading. Here, you can create an account for as little as $100 in some cases. In order to alleviate some of the risks of trading, you should have more than this in your account, but it is possible to trade with these small amounts of money. Just know that the risk you take on will be a lot more than it needs to be if you do go this route.
Types of Trades, Types of Underlying Assets
Next, ask yourself what you want to trade. What do you have experience with? What do you already know that you enjoy? These are important questions. While you can likely teach yourself to trade anything in any way, you want to begin with what you are naturally interested in. Trading is tough. It can be monotonous, and it can be downright frustrating, especially when you have strung together a number of unexpected losing trades. If you are naturally interested in the area where you have started, you will be more inclined to keep pushing through the inevitable tough times you’ll face. It serves as a built in safeguard to encourage you to keep trading.
Everyone faces losses when they trade, even the best professionals in the world. Being able to compensate for them is the only way to turn this into a profit. If you like following politics, then the Forex market will hold appeal to you. Although politics is not the only thing that influences how currencies interact, it is one of the big things that moves prices. Keeping your eye on the world of politics will naturally incline you to be a better Forex trader, especially once you gain a better feel for how these events and policies impact prices.
This principle can be applied to almost anything. Do you like computers? Focus on tech stocks. You can convert your interests to almost any kind of trading. You just need to be flexible and a little creative with how you interpret things. Not only does this give you an instant area of expertise, it makes trading a lot more fun—even when it is difficult.
You’ve probably heard the phrase that experience is the best teacher. We’re not going to argue against this, but we will elaborate on it a little. Experience will teach you how to trade any type of instrument more effectively. However, with this experience you will learn the kinds of things that you like about your market of choice, and the things that you dislike. There are many similarities between different markets, and you might find that as you learn more, you find your original interests shifting. For example, maybe you started out in the Forex market, but now you trade currency pairs in the binary options market. This is actually a very common switch, and it’s not a surprising one. They both focus on currencies, but profit off of movement in different ways. You might find that the binary options market presents you with more money making opportunities than the Forex one does.
This is completely a matter of personal preference. We mention this so that you know that these kinds of shifts in your trading can and will occur as you gain more experience. It’s a completely natural progression. And if the shifts that you make help you to be a more efficient or more profitable trader.
Where to Start?
If you’re still not sure where to start, we recommend going with the lowest stakes that you can find. For most people, this will be the binary options industry. Most brokers require only a $250 deposit, but some will allow you to begin with much less. $250 is a good place to start, especially if you’re still a little unsure. Binary options span a wide range of different underlying asset classes, giving you access to stocks and indices from around the world, commodities, and currency pairs.
Binary options are not for everyone, but because of the simplicity of outcomes that you will experience, they are a great starting point. You can create an account for little, get started out trading, learn a lot, and then move on from there.
One of the bonus features that binary options brokers give you is that many also offer different types of trading platforms. Some also allow you trade with spreads, some have CFD platforms, and some even have a Forex trading platform that they are associated with. Choosing the right broker allows you to grow as you need to, and expand into other areas of trading if and when you are ready to. And because of the low cost of entry to these brokers, there is very little relative risk involved in the learning process.
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