A guide to becoming a better novice trader in the United Kingdom

Finance

As a novice trader in the United Kingdom, it is crucial to become familiar with different types of options trading to make informed decisions when participating in the market. This guide will provide an overview of the UK’s main types of trading: share dealing, contract for difference (CFD), spread betting, and foreign exchange (forex).

Share dealing is the most common type of trading in the UK and involves buying and selling shares of companies listed on the London Stock Exchange. CFDs are similar to share dealing but allow traders to speculate on the price movement of a security without actually owning the underlying asset. Spread betting allows traders to bet in the direction of a security’s price movement, and forex trading is the act of buying and selling foreign currencies.

When choosing a broker, it is important to compare fees, account minimums, and the types of securities that each firm offers. It is also essential to read reviews and assess customer service offerings before selecting a provider.

Once you have chosen a broker, opened an account, and funded it, you will be ready to start trading. Before placing your first trade, however, it is crucial to develop a trading strategy. This strategy will help you make informed decisions about which trades to place and how to manage your risk.

A fundamental trading strategy

A fundamental trading strategy should consider the following:

  • Your financial goals. What are you looking to achieve by trading? 
  • Your risk tolerance. How much financial risk can you take on? 
  • Your time horizon. How long do you plan on holding your position? 
  • Your exit strategy. How will you know when to sell?

A money management plan

In addition to a solid trading strategy, it is also essential to have a sound money management plan. This plan should consider how much capital you are willing to risk on each trade and how you will manage your overall portfolio risk.

Some key money management considerations include:

  • Position sizing. How many shares or contracts should you buy? 
  • Stop-loss orders. At what point will you exit a losing position? 
  • Take-profit orders. At what point will you exit a winning position? 
  • Risk-to-reward ratio. What is your target profit versus your stop-loss? 
  • Diversification. How can you reduce your overall portfolio risk?

What are the risks of day trading in the UK?

There are a few risks to be aware of when day trading in the UK:

  • Market risk. The market can move against you, and you can lose money. 
  • Liquidity risk. There may not always be someone to buy or sell your security at your desired price. 
  • Margin call risk. If the value of your account falls below the required margin, your broker may force you to deposit more money or close out your positions. 
  • High-frequency trading risk. Algorithmic traders can place orders faster than humans, impacting the prices you pay or receive.

How can I overcome these risks?

The best way to overcome these risks is to have a solid trading strategy and money management plan which takes into consideration your financial goals, risk tolerance, and time horizon. Diversifying your portfolio and only trading with money you can afford to lose is also essential.

When day trading in the UK, choosing a reputable broker with low fees, good customer service, and a robust platform is crucial.

What can you trade in the UK?

The UK’s main markets are the London Stock Exchange (LSE) and the Alternative Investment Market (AIM). The LSE offers a wide range of securities, including shares, bonds, and derivatives. Futures contracts and listed options are also traded on the LSE. The trading hours for these products vary depending on the security.

The AIM is focused on smaller companies and is considered to be riskier. Other popular markets in the UK include the FTSE 100 index, the GBP/USD currency pair, and gold.

Conclusion

Day trading in the UK can be a profitable way to invest your money. However, choosing a reputable broker, developing a solid trading strategy, and having a sound money management plan is essential. Remember to diversify your portfolio and only trade with money you can afford to lose.

Continue Reading

Becoming A Trader – What Are The Steps?

Business Money

Thanks to the Internet, becoming a trader has never been easier. Previously the exclusive premise of trained Wall Street brokers and professionals, the trading industry has been blown wide open by the range and reach of information available for amateurs and newcomers online. Trading is lucrative, it’s (reasonably) simple, and it’s enjoyable, too, especially if you like your work to be varied and exciting.

It’s not easy to know exactly where you need to start, though. Trading might be more accessible than it’s ever been, but it can still sometimes seem a little “closed off” to those who aren’t in the know about the steps they need to take. We’ve put together a useful list of steps you need to take to get you started as a trader.

1. Know yourself

Unfortunately, the first step doesn’t actually involve getting started on trading, or at least not right away. Put simply, you need to know who you are before you start trading. Do you have the skills required to make this a full-time job, and to commit yourself to it as though it were any other form of employment? When you become a trader, the onus is all on you. There’s no employer looking over your shoulder and making sure you complete that assignment on time, and there’s no punch card you slot through every time you clock in.

If that sounds attractive to you, then that’s a good start, but you’ll also need a very good head for numbers, a sense of self-worth that doesn’t get knocked during periods of downtime (which there will be), and a working knowledge of the ins and outs of finance. If you’re confident that you have all that, or that you can acquire it, then congratulations: you’re the right kind of person for trading.

2. Research markets and brokers thoroughly

The Internet isn’t just a great resource for trading in itself; it’s also a fantastic place to simply learn more about your chosen subject. In the case of trading, for example, it’s imperative that you understand the difference between the various kinds of securities you’ll be trading in, as well as the dynamics of how these different securities trade and how they will impact your capital.

Depending on the kind of trading you want to engage in, you’ll also want to research your brokers thoroughly to get an idea of the best services available to you. Websites like Forex Trading Expert are fantastic for this. Forex Trading Expert collates all the top foreign exchange trading brokers and rates them based on independent research and community review, so you’ll always know you’re getting the best service available.

3. Build up capital before you start

During your time as a trader, it’s inevitable that you will have downtime. Whether you make a mistake in terms of investment or the stocks you’ve invested in simply don’t perform too well in a given period of time, it’s no reflection on you that there will be times when trading doesn’t make you the profit you’d like it to. During these times, it’s really important that you have a bed of capital you can fall back on.

This also depends entirely on the scale at which you intend to trade. If you’re a small-scale trader and don’t want to enter too heavily into the market, then you’re probably safe with a smaller amount of capital (say $25k-50k). If, however, you want to trade as a full-time job and don’t intend on having any other supplemental income, then you should have at least around $100k-$150k before you begin.

4. Keep an eye on strategies – and don’t be afraid to switch

There are a number of tailored trading strategies available to both novices and experts, and they’re great ways to get started. It’s wise to have more than one strategy under your belt so that, should one strategy fail, you can easily switch to another one without too much loss of capital or time. There are plenty of books and articles online which can help you to devise or adopt optimal trading strategies.

There will also be times when a strategy which has served you well for months suddenly doesn’t work any more. When this happens, it’s time to switch. Find yourself more than one trading strategy, preferably from different sources, and switch between them depending on the state of the markets. You should also be continually looking for new strategies – keeping on top of the markets and how they’re moving is crucial for a trader.

We hope these initial few steps help in getting you started on the road to becoming a trader. It’s unpredictable work, but it can be immensely exciting and – more importantly – extremely profitable for you.

Continue Reading

How TD Ameritrade Can Help You Make Money

Finance

When you are looking for an online broker that will help your reach your goals as a trader and an investor, you should be looking at TD Ameritrade. It is a long time brokerage house that got into the online game in the mid to late 1990s, making it one of the most lasting institutions in online brokers and Internet trading.

In the late 1980s, TD Ameritrade began a quote and order entry system over the phone, which established the companies bonafides with modern technology. Then in 1996, TD Ameritrade merged with TransTerra, which owned Accutrade, which was one of the first online brokers in the very early days of the World Wide Web. That knowledge of the industry and early entry into the world of online investing makes TD Ameritrade a great place to start investing online.

When you take control of your financial future, you take control of your freedom. You can create a whole new reality for yourself, when you take money that you make and put it to work making more money for you. The way that capitalism works is that the ones that control the capital can create new worlds for themselves, where they don’t have to answer to the old way of doing things.

But to become a successful investor, you need to stay disciplined and smart. You need to be able to read the market and understand how to move from one trade to another with the company’s fundamentals in mind. Doing your research is very important when you need to be on top of your investments. TD Ameritrade has third party research and in-depth tools that help you make sense of the market.

For more frequent traders, TD Ameritrade offers a platform called thinkorswim that allows traders to make lightening fast trades on their desktop or their mobile devices. There are chat rooms where you can interact with other traders and swap tips or advice. For beginning traders, there are a plethora of learning tools that allow you to learn about the market while you are in the platform, trying out trades and learning as you go.

TD Ameritrade also offers great educational videos and CNBC streaming news that allow you to stay on top of the market throughout the day. Watching breaking news is very important when you want to be an effective frequent trader. There is no substitute for staying informed about the market. And then there is the paperMoney feature.

That is TD Ameritrade’s paper trading platform, which allows you to trade virtual currency  and learn how to trade without risking any real money. That is one of the more valuable tools for day traders that are just starting out. It allows you to game out trades in real time and project what they might start to do without risking real cash. Paper trading is a great way to get good at trading before you start really risking real actual money.

Continue Reading