As a trader starting on a new journey, it’s crucial to know the “must-haves” of the trading world. You are likely to run into myriads of programs, sales pitches, and offers. From a pure nuts and bolts standpoint, these are three must-have trading tools no trader should live without.
A Broker
“Oh, I see Jerremy. Going straight at us with one of the most obvious ones.” Yep. It is an obvious choice. In trading, you’ve got to have a broker. The reason I bring it up though does have more than just surface appeal. You see, I am often asked to do broker reviews and help other traders and investors figure out their broker. I also get asked the question “what is the best broker out there?”. Here’s the skinny. If you are the ‘normal’ buy and hold 1-5 year type of investor, buying for value when you can, buy low sell high, and you own companies that you like, every broker is the same. If you do not actively trade, the commissions will not be a game changer and every broker has a similar platform allowing you to simply buy and sell shares. If you want to be an active and aggressive trader, someone focused on advanced option plays or day trading, there are very few worthy brokers out there for you. And that sounds like a topic for another time!
The Chart
I never make claims that fundamental analysis doesn’t work or is invalid. I think that’s a terrible statement to make. Obviously, fundamental investing carries weight, especially for longer term positions or in a bearish market. What should be known, though, is an aspect of technical analysis. Just simply pulling up a three-year chart to answer the question “am I really buying low and selling high” or “does this stock need to pull back?” Performing due diligence on a company’s financials and then buying it blind is similar to pulling up a car buying website, knowing what make and model you want to own and then closing your eyes and choosing at random which one on the list you will be purchasing.
The Plan
Usually the most elusive, yet the most important. Many traders do not know what a plan is nor how to build one. They are quite simple to create and many companies can show you and teach you how to build a trading plan for any time frame of trading. The fact is, all professionals have a plan, usually a written one. Chefs, doctors, engineers, architects, and coaches know in advance what they need to do, why they need to do it, when it needs to be done, and who is doing it. A trading plan is usually the distinguishing difference between a profitable trader and a non-profitable trader. Do you have one?
Thanks for reading and until next time, remember – love life, live life, and trade it!
