The Definitive Guide to the Best Trading Tools
This guide may contain affiliate links, please read my disclosure for more info
So you’ve decided you want to start trading or investing?
Maybe you’re looking for a side income, or you want to quit your day job, invest for retirement … or maybe you’re just looking to increase your performance as a trader.
Whether you’re a beginner, a seasoned trader, a scalper or a day trader, I’m sure you find it difficult to choose the best setups, the best strategies, the best stocks or forex pairs, the best free charting software, broker, there’s just so much to choose from….
You’ve watched youtube videos, read blogs, seen countless websites, downloaded ebooks, but you’re lost, you just don’t know where to start.
My name is John Treadle, I’ve been a amateur trader for over 15 years, now making a consistent income from my trading strategies. I’ll share with you what has or hasn’t worked for me over the years, all the best tools I’ve come across, and hopefully I can fast track your learning curve.
This free guide will take you step-by-step and provide you with all the tips to get started and grow as a trader. You don’t have to go searching hundreds of websites, it’s all here, made simple.
Ready to start the simple step-by-step tutorial ? Click here if you want to jump straight to step 1.
What is trading anyway?
In short, trading is the act of profiting from the Financial Markets.
In its most basic form, you buy financial assets (stocks, currency pairs, bonds, indexes, cryptocurrencies,..) at a certain price with an expectation to sell them at a higher price and pocket the difference.
To do that, you have to open a trading account with a broker, usually online. Your brokerage account is like a separate bank account. You will make a bank transfer of the sum of money you want to invest in that brokerage account and that money will be used to buy and sell assets.
Trading vs Investing
Trading and Investing are quite similar. The main difference is the time horizon, but also a difference in your market participation.
An investor will usually buy and hold assets over an extended period of time. A trader will have more frequent operations and could just as well buy or sell assets. Some forms of trading are extremely short term, like Day Trading (getting in and out of your positions within the same day) or Scalping (where trades last only a few seconds or minutes). I’ll dig deeper in a minute.
Long or Short
As a trader, you will buy an asset for a profit hoping its price will rise (called going long), but you can also sell it and buy it back hoping its price will drop (going short). This counter intuitive way of trading cannot be done on all assets, and it is quite regulated. Speculating on the decline of an asset is quite an advanced strategy, and should only be undertaken by experienced traders.
But if you’re interested in short trading, then I can tell you some traders are making a killing out of it. Check out Alex Temiz on Twitter, he’s a fantastic short trader, founder of Myinvestingclub.com.
Should you start trading?
The first question you might ask yourself: is trading for me?
Starting to trade can feel a bit overwhelming and quite intimidating, most of the time you won’t know where to start. You’re asking yourself all these questions:
- Am I capable of being a good trader?
- Should I trade Forex ? or Stocks ?
- Where can I learn, do I need a course?
- Can I start with just 100$ ?
- What are the risks? Can I loose all my funds?
- What about cryptocurrencies ?
All of these questions are very valid, and the answer is quite simple: you won’t know if trading is for you unless you give it a try.
But you don’t (and shouldn’t) have to commit too much money. Just set aside a small amount, and give it a try. But whatever you do, do it seriously. Don’t just gamble all your money in one go, try and have a methodical approach. And the number one rule: start with money you are fully prepared to loose (100% of it).
To be successful in trading, you will need one thing above all else : passion and discipline.
But why go through all that trouble?
Well, depending on how successful you’ll be, the upsides of trading can be pretty life changing:
- You could generate a side income on top of your salary;
- You could set aside some funds for retirement;
- You could even quit your day job if you manage to be consistent.
The great news is that there are so many tools available to aspiring traders, you can really get started with little or no money spent on courses, strategies, etc… and this Guide is here to do just that.
So, let’s get to it: how do you start trading?
How to Start Trading in 7 Simple Steps
Learn how to Trade and use the Best Trading Tools following these 7 Simple Steps:
- Define Your Goals
- Choose a Market to Trade
- Consider Robo-Advisors
- Learn Trading (12 easy tips)
- Find a Broker and Demo Trade
- Use Free Stock Chart Websites
- Find Profitable Trading Strategies
OK, so let’s get started.
Step 1: Define your goals
Defining your goals means starting with the end in mind. Depending on how much money you have, on what purpose you have for trading and what your time horizon is, you will need to approach trading totally differently.
Assess your financial bagage
How much money do you have to start trading?
That question is key, because getting started with $100 in your pocket isn’t exactly the same as starting with $10,000, or $100,000. Then depending on your goals, that will tell you the level of risk you are going to have to take.
It’s all a factor of funds, goals and time horizon. Let me illustrate :
If you have $1,000 available and want to reach $100,000 in two years, that’s a 900% return a year, so you need to multiply your account by ten every year. That is hardly a return any normal trader can achieve, let alone consistently. But if that’s your real target, then you are going to have to take A LOT of risk, and you stand quite a reasonable chance to lose all your funds.
Have realistic expectations
The tables below shows you how much you would make with three types of startup funds earning X% yearly income over a Y time horizon.
How the table reads : if you invest $1,000 for 10 years at a yearly return of 20%, you will end up with $6,192.
These tables can help you set realistic expectations for your expected rate of return depending on your starting funds and your time horizon.
Note : If you’re aiming for a consistent rate of return higher than 20% a year, you have to be aware that only very few traders achieve this kind of performance on the long run. So
Another thing to keep in mind, you legally need $25,000 to day trade stocks in the US (this is called the PDT or Pattern Day Trader rule). This means that if you buy and sell a stock within the same day, your account will be flagged by your broker if it doesn’t have the minimum funding. Forex on the other hand does not require minimum funding, however I wouldn’t advise to start with less than $500.
Don’t forget also that your funds will have to pay for the broker’s commissions. A lot of new online brokers advertise zero commission trading, but that’s not always the case, and don’t get fooled, there’s always a twist to that (as explained in this post on Robinhood).
What is your purpose?
Before you start trading, you have to be clear on your intent, otherwise you’ll get mixed up. If you just want a side income to complement your monthly salary, that means two things:
- You cannot gamble that salary, you can only use a part of it for trading or maybe you have savings
- But on the other hand you’re not depending entirely on trading to pay your bills
It is much safer to start that way than to decide from the outset that you’re going to quit your job and make a living out of trading. Take it step by step, and maybe if you’re successful and consistent you might achieve that dream.
There are some great books on Day Trading that will give you an idea of what it takes, I definitely recommend checking out these top recommendations, and you can start with Andrew Aziz’s « How to Day Trade for a Living ».
If however you’re looking to save funds for retirement and are ready to be a long term value investor, like Warren Buffett, then you have to adopt a specific strategy.
So start by defining your purpose.
What is your time horizon?
Part of the answer to the previous question is your time horizon. And to each time horizon corresponds a trading style.
- Investing: usually long to very long term, holding positions (usually stocks) anywhere from a couple of years to 50 years or more;
- Swing Trading: holding positions over several days, weeks, maybe a few years;
- Day Trading: positions are entered and exited daily. The day trader has no open position at the daily market close;
- Scalping: very short term trading, positions last a few seconds or minutes maximum.
Usually a scalper will use very volatile assets, because he needs to profit from very short swings in the asset. Investors on the other hand will be much more interested in the long term fundamental value of the asset. These are two radically different approaches to the market, so you need to think carefully about this.
Another factor is the time your are willing to dedicate to trading. If you have a day job and cannot spend too much time on your screen it’s going to be difficult to scalp or day trade. You might opt for swing trading or investing instead.
The all-mighty snowball effect, or the Importance of compounding
Compounded interest represents what is called the snowball effect. It’s one of the most powerful forces driving your financial returns over time.
Basically, compounded interest is interest over interest. Let me take an example:
If you earn 10% on a $100 deposit, in year 1 you will earn $10. But if you reinject these $10 in your capital then in year 2 you are earning $11, because interest will apply on a higher capital. That’s why it’s also called the snowball effect.
It is something that is hardly taught in schools, but if you start saving and investing while you’re young, you can make a huge difference in your life thanks to compounded interest. Here are some ideas to start investing before you’re 30.
Now that you have a clearer idea of your goals, you need to choose a market that you will be interested in trading.
Step 2: Choose a Market to Trade
You’re starting to have an idea of your goals and time horizon, let’s start looking at the different assets that you could trade. The tough thing about markets is the range of terminology that is used, so I’ll try and make things simple and clear.
But before going any further, watch this great video by William Ackman “Everything You Need to Know About Finance and Investing in Under an Hour”, a great piece of education well worth your time.
Here it is:
Moving on, now let’s try and understand the different assets that you could start trading:
Also called equities, or shares, stocks are a small portion of the capital of a company. When you own a share of Microsoft, you own part of the company, you are a shareholder. And when Microsoft makes a profit and decides to distribute it to its shareholders you will earn a small profit per share, called the dividend. Owning stocks is one of the simplest forms of trading or investing. You simply choose a company that you think has a profitable future ahead. Then you buy a stock and hold it for as long as you want.
To get a better understanding of stock trading, I have a complete guide providing you with « 20 Ways to Learn Stock Trading ».
A bond is different. When a company needs to borrow funds to finance its development, it has several options. It can go to a bank and get a loan, or it could float bonds on the market. For example, Microsoft will decide to borrow $100 million on the market and will issue 1 million bonds worth $100 dollars each. To each investor (bond holder) Microsoft will pay an interest (called coupon), for example 2% per year, just like it would pay the bank an interest if it had taken a loan.
So if you buy a Microsoft bond, you’re actually lending Microsoft some money, and Microsoft will repay you that money at a specific period of time, let’s say in 5 years time (Bond maturity). In the meantime, it will pay you the fixed interest, which is why Bonds fall in a category called « Fixed Income » products.
The risk you take when you buy a bond is that the company will fail to pay back its debt. That’s why companies that pay high interests are usually the most risky, the extreme case being “Junk Bonds”.
The forex market is the Foreign Exchange or currency market, where world currency pairs are traded against one another 24 hours a day (except weekends). A currency pair will be the EUR/USD for example, representing the exchange rate of 1 euro converted into US dollars.
It is one of the biggest markets out there and trades around the clock, which is very convenient if you have a day job. But it’s also one of the most risky, because you can usually trade with a lot of leverage. Leverage Is the concept of buying an asset for a fraction only of its cost, thereby multiplying your potential profit (and risk). If you’re interested, here’s an article on Leverage in the Foreign Exchange market.
Trackers (also called Exchange Traded Funds – ETF) are a recent form of investment. Their popularity keeps growing thanks to their low-cost and tax efficient model. They are investment funds traded on stock exchanges, holding collections of securities (stocks for example) that usually replicate an index (eg. S&P 500), an industrial sector (eg. Healthcare) or a specific strategy (eg. High Yield dividend stocks). They are quite similar to mutual funds.
If you’re interested in knowing more about some recommended ETFs, check out this article on the Top 5 ETFs for 2020 on Bankrate.
And for an insight on ETFs you can read John C. Bogle’s (founder of Vanguard Group) « Little Book of Common Sense Investing ».
Options and Futures are more complex assets to trade, they are called derivatives. That means they have an underlying asset, like stocks or bonds or Forex.
An option will give you the right to buy (call option) or sell (put option) a specific security at a precise price (strike price) at a specific point in time (expiry date). Futures will be quite similar, except that at expiry date you have to buy or sell the security.
Options are used in many different types of strategies, like hedging, income or speculation. As a highly leveraged product, options trading can be hugely profitable, but is is definitely not for novice traders, they demand quite a high degree of skill.
If you want to know more about options, here’s a list of the Best Options Trading Books.
We all know Bitcoin, the king of cryptocurrencies. But there are countless others.
In short, cryptocurrencies are internet-based mediums of exchange that use cryptography to conduct financial transactions. Cryptocurrencies use the blockchain’s technology to enforce decentralized, transparent and immutable transactions. The main idea behind cryptocurrencies is the absence of any centralized authority, making them in theory immune from government interference.
Cryptocurrencies can be exchanged very quickly, with low transaction fees and in a secured manner using a public key (similar to a bank account number) and a private key (similar to a transaction password).
They can also be traded on specific exchanges, their huge volatility making them both extremely dangerous but also potentially quite rewarding.
I have a few articles to help you better understand cryptocurrencies and how to trade them:
- What is Bitcoin: better understand the king of cryptos
- Why is Bitcoin a unique opportunity?
- The top cryptocurrency exchanges: where to trade cryptocurrencies
- Bitcoin’s wildest predictions: how some well-known punters price BTC above $100k
So, which one is best for you?
Choosing your preferred market to trade can be tricky, so here’s my recommendation:
- Choose Stocks if you like the idea of investing in a company or a product that you believe in, or in a CEO you trust. Stocks are a good option for long term investment or dividend strategies. If you think Amazon, Tesla, or Netflix will change the world, then their respective stocks give you an option to be a part of that story and profit from it. Amazon first listed at $18 in 1997, if you had invested $1,000 at that time, your investment would be worth a staggering $120,000 as of Q1 2020.
- Choose Bonds if you want a steady fixed stream of income with a risk level you can easily control. In an environment of very low interest rates, bonds can be a good way to diversify a portfolio with low risk assets and decent returns. But Bonds won’t make you rich overnight, so that might be a good option only once you have reached a certain level of funds.
- Forex will be your option if you want highly leveraged and therefore high risk trading, or if you want to trade news events from the economic calendar. There are very few successful forex traders but if you have the skill and discipline, Forex can probably be one of the most lucrative forms of trading. See how you can get inspired by these Top Forex traders.
- Trackers (ETF) are a great way to get started. They allow you to invest in a basket of assets, thereby spreading the risk. You can even choose a sector you believe in. They are low-cost (with fees as low as 0,05%), tax friendly, and available with many brokers or robo-advisors (more on that below). Check out item 12. in this article about stock trading, it covers Passive Investing with ETFs.
- Options and Futures: as a beginner, I would definitely not venture in derivatives straight away. But if you’re willing to put in the effort, to educate yourself, or if you’re already a seasoned trader then options can be very rewarding. Trading derivates is the most leveraged form of investing, and there are so many option strategies available. I’ll guide you to a number of them.
- Go for Cryptocurencies only if you are in one of two cases :
- a) if you are convinced that cryptos and blockchain will change the world forever and you are willing to take a long term bet on them (see my Long Term Bitcoin Strategy). You will be called a HODLER in crypto jargon.
- b) if you’re a seasoned scalper and you want to trade the crypto’s huge volatility.
Now let’s take a look at some statistics to see what are the odds of you becoming a successful trader.
What are your chances of becoming a successful trader?
Common wisdom says that 90 to 95% of all traders fail. But there is no scientific evidence to that, so it is kind of a popular estimate. That was until a European regulation came into effect mid 2018, requiring brokers to display on their marketing material what percentage of their clients lost money.
And here are the brokers with the most extreme scores:
- eToro : with 65% of losing accounts, eToro came out first. This is probably due to their CopyTrader technology or social trading functionalIties enabling traders to exchange ideas or even replicate leading traders’ performance.
- FXTM came out last with 89% of losing accounts, probably holding a base of mostly unexperienced traders;
More complete numbers are available here .
It is interesting to look at the reasons behind this low success rate. Tradeciety ran through a lot of broker data and came up with an interesting breakdown of the reasons why most traders fail :
All the stats can be found here.
Now that you have a better understanding of financial markets and where your place might be, let’s take a look at Robo-advisors, a semi passive form of investing that could get you started .
Step 3: Consider Robo-Advisors
If trading looks a bit overwhelming, there is a first step you can take which is to use an online portfolio manager, also called Robo-Advisor. This is the way to go if you’re comfortable with a hands off approach to trading and investing. It can also be a way to dip your toe and get a feel for financial markets before you turn to real trading.
What are Robo-Advisors?
New young startups are creating innovative and revolutionary ways to invest funds, they are called Robo-Advisors.
These essentially mobile platforms offer a fully digital experience. Their user-friendly interfaces help you save and invest money with minimum effort and cost.
It is now possible to get started investing in a matter of minutes and a few clicks. Costs are also a fraction of what old school wealth management firms used to charge.
When should you opt for a Robo-Advisor vs Trading?
First, keep in mind that Robo-Advisors do not provide financial planning but automated or semi-automated services.
So if you need a high degree of customization or advanced tax optimization they might not be the best choice.
If however, you are looking for low-cost, user friendly and reasonably passive services, Robo-advisors are the thing. In fact, you can’t really compare them to trading because as a trader you make the decisions, and risk reward ratios are accordingly totally different.
The 10 things to look at before choosing a Robo-Advisor
Robo-advisors fall under many categories, and new ones keep opening, so here are the 10 things I recommend you to look at before choosing:
- Minimum deposit requirement: could range from $0 to as much as $25,000
- Management Fees: usually between 0.15% and 0.5% of your assets annually
- Portfolio content: stocks, forex, mutual funds, fixed income, ETFs, cryptocurrencies,…
- Account types: taxable accounts, IRA (Individual Retirement Account)
- Goal setting functionalities: ability to set targets (save for retirement, retiring before a certain age,…)
- Tax loss harvesting capabilities
- Advisor or Broker-Dealer: very different from a regulatory perspective, Investment Advisors can provide targeted advice
- Socially Responsible Investing (SRI): is it available?
- Educational content: availability of tutorials, courses, advice
- Customer service: mode of access (mail, phone, chat), open on weekends?
The Top 5 Robo-Advisors for 2020
Here are my top 5 Robo-Advisors for 2020 and what makes them attractive:
Betterment: no minimum deposit, excellent service, goal setting functionalities, personalized projections, tax-loss harvesting, automatic re-balancing. When you sign-up, they will analyze your profile and goals and make personalized recommendations. Excellent mobile app, it will tell you exactly what mix of stocks, bonds or ETFs will be invested depending on the risk appetite and time horizon. Lastly, the Betterment Everyday service is a cash management suite that helps you make the most of everyday money. Clearly one of the industry leaders.
Wealthfront: offers a full range of services for hands off investors, it is one of the most highly regarded apps with its planning tools, automated portfolios and advanced tax optimization strategies. Wealthfront features low fees and a full range of services for hands-off investors, goal investing, even an interest-paying cash account. Account minimum is $500. Wealthfront is consistently rated among the top Robo-advisors by leading industry websites.
Personal Capital provides leading financial tools and advice for high net-worth customers. It boasts very advanced services, combining a robo-advisors with personalized advisory services. It is truly one of the best apps to track and manage your money, with award winning tools, it is quickly becoming a very significant player of the Wealth Management industry. Personal Capital is only open to US customers and targets $100,000 plus customers. You can use Personal Capital’s app for free to receive regular summaries of your spending, net worth, and investment portfolio.
Ellevest is an excellent service for goal-based investing, and it specifically targets women. It has been created under the principle that women have specific investment needs (longer lifespan or gender pay gap). No minimum investment is required. The service is perfect for newbies but allows investment in 21 different asset classes. As a fiduciary, Ellevest has an obligation to act in its client’s best interest. There are three types of accounts at Ellevest :
- Digital: personalized investment portfolio, Ellevest Impact Portfolios, Automatic deposits, Automatic rebalancing, unlimited support from Concierge Team
- Premium : Digital features + access to a certified financial planner and executive coaches
- Private Wealth Management: only for qualified clients, offering private wealth management with values-based investing options.
SoFi wants to help you get ahead of your financial life. Borrowing, saving, spending, or investing are all possible using SoFi. If you want a loan, a number of options are opened to you: student loan refinancing, medical resident refinancing, dental resident refinancing, mortgages, mortgages refinancing, personal loans and more.
Investing with SoFi comes with no fees, and you can go with either automated investing or active investing if you want to be more hands-on.
Like all of the companies featured above, SoFi is purely digital, which is why it can be aggressive on tariffs. SoFi definitely stands out for the quality of its educational material.
If you want a more in-depth review of the available robo-advisors, check out my article on The 15 best Robo-advisors.
Now if you decide that Robo-Advisors are not for you, and you want to push ahead with trading, let’s see how you can take the first essential step and learn trading.
Step 4: Learn Trading (12 easy tips)
First, let’s be clear.
You can get the best educational background you want (trading books, seminars, courses,…), but until you are live in front of that screen with graphics pulled up and real funds ready to be traded, you will never know how good or ready you are.
The sum of psychological factors that go into trading activity (fear of losing, fear of pulling the trigger, revenge trading, excessive confidence, FOMO…) is just huge. In fact, one of the most important bricks of your education as a trader should be around handling your emotions and learning to cope with losses.
There’s an interesting speech Charlie Munger gave at Harvard on The Psychology of Human Misjudgment, it explores the tricks our mind plays on us, and a lot of them can be applied to trading.
Most of the educational material around trading usually covers psychology in quite some length. And trust me, this is THE most important thing that you will have to learn and master.
So, how can you learn Trading? Here are 12 easy tips.
Tip #1: Read the best trading and investing books
One of the best (and cheapest) ways to learn trading is by reading books. Make sure you select books written by well known traders, only they have the credibility to really teach you the tricks.
Depending on the type of trading you’ve decided to look into, I have a book selection for you to check out:
- The Top 10 Day Trading Books
- The Top 12 Investment Books for Beginners
- The Best Options Trading Books
- The Top Rated Personal Finance Books
Out of these book selections, my 4 favorite reads are clearly :
- How to Day Trade for a Living by Andrew Aziz
- How to Make Money in Stocks by William J. O’Neil
- The Little Book that Still Beats the Market by Joel Greenblatt
- Market Wizards by Jack D. Schwager
I would add a special mention to a book written by Karen Peloille, a famous French trader known for her mastery of the Ichimoku system, a Japanese system she trades very efficiently:
- Trading with Ichimoku by Karen Peloille
I am especially fond of the Ichimoku system and have traded it quite a lot, you can check out my Simple Ichimoku Trading Strategy
Lastly, I’ve always felt that Real Estate was a fabulous way to reinvest potential gains from trading once they got significant. Or maybe you have read the Great Book Rich Dad Poor Dad by Robert Kiyosaki, then you should be interested in this list of the Top 10 Books on Real Estate Investing.
Tip #2: Learn from free online resources
Here’s the good news, there’s a wealth of free education available.
If you want to learn Forex, start by reading this Beginner’s Guide to Forex Trading from Investopedia. It is extremely well written, simple to understand and covers all the basics : what is the Forex Market, Forex for Speculation, Why we can Trade Currencies, A Brief History of Forex, Currency as an Asset Class, Forex Trading Risks, and a host of other resources.
Another great free resource for Forex Trading is the « School of Pipsology » over at Babypips.com.
The course is 100% free, very detailed, extremely clear, definitely a place you could start from.
If you want to learn Stock trading, then turn to these these Stock Basics articles from Investopedia. They are very well written, simple to understand and will give you all the basic knowledge: what are stocks, the different types of stocks, how stocks trade, … and lots of other basic know-how on the markets.
Tip #3: Read free articles on trading
Quite a vast amount of literature is produced daily on stock trading, however regular articles stand out in terms of quality, usually from a few websites. Bloomberg is one of them, with daily articles and news on all types of assets in their Markets or Currencies section. Google Finance and Yahoo Finance are also quality sources, so is investopedia.com.
More specialized articles can be found on seekingalpha.com. Some of these sites will enable you to subscribe to RSS threads, providing you with a regular feed of their articles.
Concerning Forex market news, one of the leading websites for is dailyfx.com. It provides the latest info on world markets, facts that affect currencies and even analyst tips.
Tip #4: Buy an online trading course
Once you have given yourself a basic education, there is a possibility that you’ll want to take things a step further. Online courses can provide you more advanced techniques, and Udemy is a wonderful platform for that.
Some of the courses are very affordable (as low as $10.99) and can provide you very valuable tools and techniques. While choosing an online course, I recommend that you carefully read the reviews so that you choose the ones with an established reputation.
Warrior Trading is another great provider of Trading Courses. It has a very high reputation, and provides courses for absolutely all types of traders (day traders, swing traders,…).
Tip #5: Attend a Trading Seminar
Trading seminars are a great way to exchange first hand with top-notch traders or other like-minded investors. You can also get insights on things that are not that easy to convey in online courses: trading psychology, real life examples, track records.
For some people it really unlocks something in their trading performance and they refer to the seminar as the point in time when their trading took a leap forward.
Another important point is that a seminar creates a community, and that bond can tremendously help you in overcoming the inevitable difficulties you will face.
A few well-known seminars
Seminars are usually much more expensive than online courses, but they will give you the real life experience. Some well-known ones include:
- Dan Zanger: a trading legend famous for having turned $10,775 to over $18,000,000 in under 2 years; as an alternative, Dan also has a famous newsletter (The Zanger Report) edited via his website Chartpattern.com;
- Mark Minervini is another Wall Street veteran and famous trader. His seminar is called the Master Trader Program, it has good reviews and is definitely one of the references in terms of Trading seminars;
- Warrior Trading: Ross Cameron is an acclaimed trainer. He proposes a range of options, from online courses to Chat Room access or full-blown Trader Masterclasses. Worth checking out, his Trustpilot rankings are outstanding.
Tip #6: Emulate the greatest traders
Learning from the greatest traders is both inspiring and thought provoking.
Along the years, I have researched hundreds of traders and strategies, and for Forex Trading I’ve shortlisted the best of them. They’re not all well-known, but all are highly skilled. You can find them in this article on 17 successful Forex Traders you can emulate.
I suggest you also learn from some of the world’s most outstanding traders in some great books that have been written on their success stories:
- Warren Buffett : the legendary Oracle of Omaha
- Ray Dalio : founder of Bridgewater Associates
- George Soros : the man who broke the Bank of England
- Jesse Livermore : the trader on which « Reminiscences of a Stock Operator » was based
- Ed Seykota : turned $5k into $15m in 12 years
- Richard Dennis : the man behind the fascinating « Turtle Traders » experiment
- Paul Tudor Jones : another legendary hedge fund wizard
Exchanging trading ideas with other investors is a great way to break the isolation.
A few platforms will allow you to do that.
One of the best options is to use the social networking capabilities of TradingView.
This tool is amazing, it integrates one of the most powerful charting platforms with social trading, screeners, and it even has broker integration for those who want to trade from the charts.
Then, some brokers are totally oriented towards social trading. eToro is the most well-known, allowing you to connect with other traders, discuss trading strategies and even use the CopyTrader technology to automatically copy the trading performance of the best traders.
Tip #8: Learn to trade with Youtube videos
Videos are a great way to learn, and there is some very valuable content available free on Youtube.
Here’s a series of very useful videos, tackling the basics of Forex along with some psychological aspects of Forex Trading.
A video by Jayson Graystone : 10 ways to Learn Forex Trading
A good course on Forex Trading by Adam Khoo
Forex News Trading with Jarratt Davis
Probably THE best source there is for aspiring Forex Traders
Now let’s take a look at a different aspect of Trading with the more Long-Term approach of Dividend Investing.
Tip #9: Dividend Investing 101
A great form of passive income strategy is to buy dividend paying stocks.
This is a strategy quite similar to the buy and hold long term approach, except that you focus more on the regular cash flow from dividends than on the capital appreciation of your stocks. Investopedia has a series of introductory articles on dividends and dividend investing.
There are also some very good specialized websites for dividend investors, such as dividend.com, proposing a proprietary DARS rating to select and screen the best dividend stocks. I have tried it and can vouch for the quality of the selection.
If you want to take things further, check out this article around 12 Tips to buy Dividend Stocks.
Tip #10: Subscribe to Investment Newsletters
There’s a good number of newsletters available for stock pickers. They can provide you with lots of trade ideas. Here’s a list of some interesting ones, some free, some paid:
- Morning Brew : a free daily delivery of the top business stories
- Income Investor : published by Gordon Pape, recommended securities for an 8% yearly return
- Thoughts from the Frontline : written by John Mauldin, it is one of the most read weekly newsletters in the investing world, published weekly
Tip #11: Subscribe to online paid Investment Research Services
Paying for research can be a good option if you’re out of ideas or don’t have the time to do the research. Some very good subscription services are available such as Investors Business Daily (IBD), created by William J. O’neil the founder of the CANSLIM model. You can also give Zacks a try or Morningstar, both very well-known stock advisory services.
Tip #12: Take a riskier approach and learn options trading
In case you want to take a more aggressive approach to trading, you can turn to options.
Essentially, an option allows (but doesn’t require) an investor to buy or sell an underlying asset at a predetermined price (strike price) over a precise period of time. You will have two types of options: Call options (option to buy) or Put options (options to sell).
Benefits and risks of options trading
On the one hand, options require smaller amounts of capital than buying stocks outright and they can be used to hedge or protect an investor from a downside risk.
On the other hand, you could end up exposed to unlimited losses if you’re not careful. You will also need to manage the time decay factor (evolution of the price as the expiration date approaches). Finally you’ll have to make sure margin requirements don’t build up too much in terms of trading costs.
All being said, good options traders are often among the most successful and mastering this asset class can put you in an entirely different league in terms of earnings.
Now that you’ve kicked off your education as a trader, you need to choose a good broker and start practicing on a demo account.
Step 5: Find a Broker and Demo Trade
If you want to be a profitable trader, you need a broker that fits with your goals and trading style. The good news is that competition among online brokers is fierce, which keeps costs on the low side. There are many options open to you, but choosing a broker will mostly depend on the degree of sophistication you are willing to pay for. Do you want a state of the art platform or a mostly low-cost option?
Let’s take a look at the 10 things you should consider when choosing an online broker:
- Where you live: depending on your place of residence, all brokers might not be available. Interactive Brokers, FXCM or IG might be available worldwide, while Charles Schwab or TD Ameritrade will only accept US citizens.
- Minimum account funding: some brokers could ask you for up to $5,000 but most will have minimal requirements;
- Securities you want to trade: some brokers are specialized in Forex, others in CFDs. If you’re going for stocks, is it US stocks, European stocks? If cryptos is your choice, then you might need a dedicated crypto exchange.
- Fees & Commissions: this is absolutely key, transaction costs will be a huge part of your P&L. Be careful with zero commission brokers, you will always pay something in a form or another (check out my Robinhood review). If you are going to be a scalper, getting the lowest possible transaction costs is mandatory;
- Platform is another key element. Look at the charting capabilities, is there a mobile platform, how elaborate are the tools? Again, if you’re going to scalp for example, you will need hotkeys and lightning fast execution.
- Social Trading functionalities: can you share ideas with other traders, are there « copy trading » options to follow the best traders?
- Educational resources: if you’re a beginner, the quality and quantity of online training material will be important.
- Paper trading: make sure your broker provides paper trading accounts, this will enable you to learn the physics of trading firsthand and check if you have a viable strategy
- Market data and analysis: if you’re already a seasoned trader, you might want high end investment analysis and fundamental information provided by professional investors
- Funds protection: is the broker a member of specific regulatory authorities that will provide rules and protection (FINRA, SIPC, FDIC)? Look out specifically for the SIPC the consumer protection rules to keep your funds safe.
This might seem a little overwhelming, so let me simplify things and make five broker recommendations depending on what type of trader you are :
- Option #1: eTORO ⇒ if you’re a beginner looking to try your hand at swing trading stocks and would like copy trading options, and the possibility to trade Forex, stocks, or cryptos. The winner for dipping your toes and social trading.
- Option #2: Robinhood ⇒ a very good discount broker, with an ultra simple interface and mobile app. Read my full review. The clear winner for ease of use.
- Option #3 : eTrade ⇒ if you live in the US, an excellent broker for beginners. Includes $0 trades. Excellent platform, regularly awarded (especially options). Great mobile app. The winner for mobile trading.
- Option #4: Interactive Brokers ⇒ if you need pro features, IB is a very advanced broker with rock bottom transaction fees if you’re a heavy trader (perfect for Day Traders). Their platform could use some refreshing but their margin rates are unbeatable. Accessible in 26 countries. The winner for fees & commissions.
- Option #5: TD Ameritrade ⇒ for their fantastic platform thinkorswim, a great option for beginners, regularly awarded in best broker rankings. Fantastic educational material, no minimum deposit and $0 stock trades. The winner for Platform & Tools.
Exchanges for crypto trading
If you specifically want to trade cryptos, I’ve covered the Top Cryptocurrency Exchanges for buying Bitcoin or Altcoins.
If you are going to be an active Crypto Day Trader, then you definitely have to take a look at the Coinigy platform.
Now open a Demo Account
This is probably one of the most important pieces of advice in this guide:
“DO NOT TRADE WITH REAL FUNDS UNTIL YOU HAVE AT LEAST 2 MONTHS OF PROFITABLE DEMO TRADING”
You wouldn’t drive a car without a license, why would you waste precious funds and start trading until you have reasonable assurance that you can be profitable? that would be madness.
So the advice is simple, open a demo account with your broker of choice (most offer that option), and start trading.
Here are the 3 main reasons to open a Demo Account
- Learn the mechanics of trading: how to place an order, the different types of orders (limit, stop,…), the impact of commissions, margin requirements, etc… On a demo account you can mess it all up, there’s no consequence other than climbing the learning curve.
- See if the market you’ve chosen fits you: if you’ve chosen Forex, demo trading it will tell you if the dynamics of that market fit you
- Test your trading style: not everyone can be a scalper, it requires a lot resistance to stress, long hours of screen time, etc… Scalping on a demo account
Let’s be clear : even if you successfully trade demo for 2 consecutive months, you won’t know if you can replicate that until you go with live funds. So it would be madness to go live without these successful two months. Do it seriously, treat trading like a business, you will only succeed if you’re committed, serious and disciplined.
Another great platform to Trade Demo is TradingView. The HTML5 web-based interface is fantastic, and the number of tools and functionalities limitless (screeners, social trading,…). I’ve covered Tradingview in this Complete Beginner’s Guide.
Choosing the best Trading gear
A broker is fine, so is a Demo account, but none of that is possible without adequate gear. And if you’ve chosen trading for the nomadic lifestyle, a laptop is definitely what you need.
In order to make the right choice you will need to check a few of your laptop’s specs:
- Speed. Trading means quick decision making, You need a laptop that boots quickly in order not to miss a trade.
- Screen size and quality. Essential given the long hours of screen time.
- Lightweight. You will carry your laptop with you everywhere.
Given these criterias, here is an article on the best laptops for trading.
Get yourself a comfortable Trading Chair
As a Day Trader you it’s likely you are going to spend hours in front of your screen. You eyes will feel sore and your back will ache, but if you want to make this easier, check out this amazing Trading Chair.
Designed and made with the total comfort of humankind in mind. Esthetics, form and function allow this series to utilize a synchro tilt mechanism with infinite lock, sliding seat, pneumatic height adjustment, and headrest option all in one very unique chair…
Give yourself a treat.
Now that you’re all setup with a Broker, an account and some gear, let’s take a look at some of the free websites that can really help you in your trading.
Step 6: Use Free Stock Chart websites
Whilst your broker might have a great platform, with all the bells and whistles, it might not have all the functionalities available.
So there are a few fantastic free options that are well worth considering to perform your Technical or Fundamental analysis. That includes advanced indicators, position follow-up, screeners or trading social networks.
The Best Free Stock Chart websites
I’ve covered the top 10 Free Stock Chart websites, but if I had to choose only two that would be :
- TradingView: an amazing all-in-one platform for all you technical analysis needs. I have a complete TradingView Beginner’s Guide.
Finviz: for its fantastic free screening capabilities. With screeners, you can enhance your watchlists and narrow down on stocks with very specific characteristics. Finviz excels with its free Stock Screener, mainly on US stocks. The filter options are amazing, you can screen stocks by literally every available criteria (from detailed financial ratios, technical analysis patterns, etc…).
Cryptocurrency Analysis Tools
If you want to analyze the dynamics of Bitcoin or other altcoins, you can definitely use Tradingview , but there are more dedicated options, I have covered the top 3 Cryptocurrency and Bitcoin analysis tools.
Step 7: Find Profitable Trading Strategies
You’ve chosen a market and a trading style, you have a broker and a demo account, now you need a Trading Strategy.
Ironically, finding a good Strategy isn’t all that hard. The hard part is sticking to it, trading it consistently once you’ve tested it, and remaining disciplined.
All great traders will tell you that success in trading will be defined by your mental ability to manage losing periods while remaining consistent in applying your strategy, provided backtests have proved it worthy.
Know what you are looking for
Before you start searching all over the place for any kimd of strategy, you need to go back to your initial choices. What asset have you decided to trade, over what time horizon ? (Eg. Forex, swing trading). Remember, this is one of the first steps we took. You made these choices depending on your goals, your initial funds and your personality. If you’re not clear on that, go back to Steps 1 and 2.
Keep in mind that success will come from finding good strategies and making them your own. That means three things:
- Backtesting the strategy
- Trading it on a demo account
- Monitoring your results closely: that way, you will know what to expect and be prepared. For example, if you know that your strategy has losing periods can generate drawdowns of around 5 or 10%, then you know that trading it successfully means sitting out these periods without panicking or skipping to another strategy. And this is fundamental. All strategies have losing streaks, and being able to remain confident in that strategy when it loses is the key to success (provided you’ve backtested).
Now all you have to do is to find strategies from established traders and make them your own. Here are some reliable sources I can recommend, I keep updating that list regularly.
The best sources for finding profitable strategies:
- Linda Bradfor Raschke’s book « Street Smart » is a very good source of trading strategies. Check out the « Holy grail », you can also research it online, it has been quite widely publicized;
- Karen Peloille’s Ichimoku strategies in her book « Trading with Ichimoku »: to me some of the best strategies available
- Warrior Trading’s strategies for trading Bull Flags and Flat top breakouts. Here is a very good video where they are explained
- Stock picks from the Contrarian Outlook website, edited by Brett Owens, it has given me loads of high yielding opportunities and I highly recommend the free articles along with the monthly paid namesake newsletter, it is brilliant
- My own Simplified Ichimoku strategy
- My own Long-Term Bitcoin strategy
- Jarratt Davis’ Forex news trading strategies
- Kim Krompass’s unique trading strategy
- Chaos Trader 63’s Ichimoku strategies at FX At One Glance
- Strategies from the traders at SMB Capital, a highly reputed Proprietary Trading firm fiunded by Mike Bellafiore. Check their Youtube Channel
If you’re specifically interested in Forex, I also have this list of 17 very good Forex Traders you can emulate, it contains links to many other profitable strategies.
I hope you can find some good strategies here. Remember to do your homework: backtest, demo, then go live.
Good. Now, you’ve started trading and maybe you want to take things a little more seriously in terms of trading setup.
Trading is a journey, it takes time (some of the most successful investors are also the most patient).
There’s no easy get rich quick way to make it. Making it at as successful trader will take a lot of dedication and discipline.
If you have moderate expectations and favor a hands off approach, go for automated trading (Robo-Advisors). Otherwise, follow the steps I have listed here, and you will stand a good chance to start hitting some of your targets.
If this Guide has been helpful, or if you feel some additions would be useful, drop a comment below.
Safe trading to all.