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If you haven't done so already, you are now probably very eager to get some money into the market to test your new-found knowledge. Just remember to start small and be patient. If you miss one opportunity, there is always another just around the corner.
But what should be the first step? Where to from here?
In lesson 1, we learnt about the basics of the stock market and how people wanting to buy stocks are required to do so through a stockbroker. We also learnt in chapter 9 that CFD's must be bought from a market maker. To begin trading, you must first open an account with either a broker or a market maker or both.
To open an account, you will need to complete application forms, stating all your contact details and proof of identity (such as your bank account details). You will also be provided with an assortment of information including a Financial Services Guide that outlines the services of the broker and/or market maker, the charges that apply and what your rights are under the broker/client relationship. Should you wish to obtain advice for each trade you execute, your broker or market maker will ask you about your personal financial situation, so that they will be able to give you appropriate advice based on that information. Also, if trading CFD's, you will be provided with a Product Disclosure Statement (PDS) which outlines any important information you need to know regarding the market maker and the CFD product.
Marketech is licenced to execute trades on the Australian Stock Exchange Ltd. in both shares and derivatives. Marketech is also a market maker for Contracts For Difference. Marketech can be contacted on 1800 00 59 55 or by visiting www.marketech.com.au. Application forms are available on the website. Marketech are also licenced to provide advice on both shares and CFD's.
Once you have opened your account and placed money in that account, you can start trading!
Three Questions for your first trade
Only three more questions need now be answered:
We dealt with the first question in lessons three through seven. These lessons covered various chart patterns and trading strategies that analysts employ to exploit these patterns.
We addressed the second question in lessons eight and nine which gave examples of derivatives - namely options, warrants and Contracts For Difference (CFD's). Finally, lesson 10 addressed the third question by examining money management and trading psychology.
In other words, there is really not much more you can do before taking that last step: trading. Your experience is not over, by any means. The real learning is yet to come and this will only come with experience. However, you now have the basic knowledge to begin.
You may now have some knowledge of the markets but there are a few other tools you may require.
You may now be in possession of some charting software. If not, a free copy of 'Marketech Home' is available by contacting Marketech on 1800 00 59 55 or by visiting the website at www.marketech.com.au. As these lessons have focused primarily on technical analysis, you will find it beneficial to have a robust charting package in your possession.
You will also find that there is plenty of fundamental information out there if you are prepared to find it. Most online brokers have free research available as part of their services or you may wish to subscribe to a research newsletter. Fundamental analysis need not be a thirty page document, just sufficient information about the health of the company (and perhaps any inherent risks!)
By finding a good charting package and good source of fundamental analysis, you are already putting yourself in front of a lot of other market participants who will only ever buy on a 'hot tip'.
So what's a good indicator and what's not?
One of the fun parts of trading is for you to find that out for yourself. No doubt your favourites will strongly correspond with your success with different trading techniques.
If you are stuck for something to start with, try a 20 day and 5 day moving average crossover looking for bullish signals only. Then only enter 'blue chip' stocks, as these generally carry less risk. Furthermore, fundamental information is readily available on 'blue chip' companies and this can be quite useful if you wish to find out about the size of the company and its market capitalisation, for example. Try trading a CFD but don't trade them on leverage to begin with. On other words, if you have $1,000 put aside for the trade, only buy $1,000 worth of CFD's (a 100% margin).
Then, try finding a company in a similar sector and/or market which has a bearish signal and short-sell the CFD for a similar value. You now have a leveraged, but relatively safe position in the market. You have also completed two trades and will now begin to feel some emotions as the stock price begins to move.
Now your journey really begins!