How to Start Trading (Compliments of Bondarb)
There have been a few requests to find the classic post by Bondarb, so it made sense to sticky it. This is what he wrote:
Here is how you learn about trading:
- Have at least 5k. If you dont have that then get it somehow, use your imagination.
- Set up an account on Interactive Brokers that allows your to trade futures.
- Pick one product that has a small sized contract...when i did this I could only trade at night so I picked Hang Seng Index Futures.
- Read up on the leverage inherent in futures and create a risk management plan...ie how you are going to size trades, use stops, add to positions, etc. notice you do this before you know anything about the market because it is by far the most important part of being a good trader. Discipline is what is going to make you a good trader not brilliant ideas. On 5k you will probably be trading 1 lots...ie 1 contract. That is fine.
- Learn how to account for your performance. Every day you should know how much you made or lost and have a good log of it. Not what the broker sends you...you should do it yourself and use them as a check. You are your own back-office and middle-office.
- Learn the interactive brokers execution platform inside and out. The IB platform is not much different then one I use at a large hedge fund so when your done with this you should be able to execute in a professional manner.
- Learn everything about the market you trade. For the case of hong Kong if thats what you picked you should know how the central bank works in that country, the politics, the composition of the stock index, valuations, etc. This will take awhile. Start by finding a local newspaper to read every day. Then go to the central bank website. Find yourself an economic calendar that shows what data is coming out in your market (they are not hard to find for free). Start very basic. Notice that you do this only after you are ready to handle all the real business of trading. Also, you should do this even if you intend on trading using mostly technical analysis...it will help.
- Start trading. Be careful. Your goal #1, #2, and #3 is preservation of capital. This is a learning experience you arent going to get rich trading 1 lots. Trade defensively at first. If you turn out to be a good trader what you think is defensive now you will probably realize later was insane so heir on the side of caution.
- If you actually do all these steps you will be a better trader and know more about markets then most kids do AFTER they complete an analyst or associate stint on a sales and trading desk...i gaurantee it.
- Remember what you are doing is learning a trade...you arent learning how to sell bonds to dumb central banks or how to kiss some bankers ass you are learning a skill that few have and makes you very valuable if you become good at it. Treat your work with due seriousness and you will be paid back many-fold.