How to choose your trading platform

Once you decide to self manage your money, first of all you need to have a trading account at a bank or a broker. Nowadays, almost every bank offers a trading platform on line, where you can trade a huge number of instruments, mainly stocks, futures, options, cfd, etf, etc and investement funds. A lot depends on the country you are based in, but is easy to have access to foreign exchanges and exchange rates.

Even if you restrict your object to one single stock index (let’s say the S&P 500?), you have a large offer of different instruments with which you replicate the movement of the index. If are newbie, stay away from futures and options. Both are highly risky and you may loose the entire capital much easily. They require some experience. Even experienced traders do avoid trading futures and options to not rise their risk profile.

If anyway you are attracted by futures, you can try a cfd broker. Cfds are replicas of futures, but you can trade them with very small amounts, using margination. Be sure to fully understand the meaning of “leverage” if you want to use these instruments. That’s the key to an infernal mechanism that can go you broke faster than you can imagine.

My suggestion is to nose into the etf world: there you can find a large quantity of instruments dedicated to almost any aspect of popular finance. Etfs cover indices, sectors, regions, rates, forex, you name it. With the brother Etc dedicated to commodities you can trade almost anything.

But we are restricting the field of interest to S&P 500. So, if you browse the list of available etfs, you may identify a batch that refers to S&P 500. They may have different construction, tipically: 1:1 replica of the index, 2:1 replica of the index, 3:1 replica of the index or 1:1 hedged against the exchange risk you assume if you are not trading in dollars. 2:1 and 3:1 exposures double o triple the action of the invested capital, and you can lose a lot. The less risky is the 1:1 hedged for it gives you the net gain or loss of the index, without any exchange leverage.

Almost any platform for trading online offer you a trial period and a training account (usually with a sound 100,000$ ready for you!) to let you evaluate the platform. Do it. Try them and try the ones that offer you a more comfortable platform, maybe extended to mobile, graphically intuitive, easy to use. It will take some days and you will have a clear idea of the best for you around. Ask, read about it and finally open your account for real at your chosen broker or bank. The word that can guide you is “confidence”.

Online trading platforms are rich full of features, with the possibility to use and customize indicators, alarms, charts,  automated trading systems and more. Personally, I hand execute all the orders, but I can see the attraction for automated execution and systems.

Once you get confidence with your new interface, and this is the real and only boring task of the  matter, read carefully on the platform user manual the section that explain order execution and all the option you have to manage your order. You may want delayed execution or an event driven one. You must master it. You must understand deeply and fully how the operation is cleared and you must have the perfect control of the interface. Make exercise with the training platform.

The platform usually let you create a group of instruments for easy access: group the etfs that go long and group the etfs that go short and chose to trade the most traded ones and with a smaller spread. Liquidity is always our best terrain. Platform offers a variety of charts and a plethora of indicators that you can setup to have a good chart at hand. Often, a chart is really worth a thousand words. Some offer  Elliott’s wave analysis and /or tools, neural network analysis, automation tools and programming languages. No doubt that if you can program, you may setup a real good working desk.

A final word: when you begin to trade you enter in an arena where anyone else identify you as the chick. You are going to lose money. Yes, broke and badly. That’s for sure. So be prepared and plan your losses. Losses are the best way to learn, with your losses you pay for your learning and your attention. Now you may focus on how it’s important to protect you capital. Plan that after a certain amount of losses you stop (and you do it!), then study and relax. You can lose 10% of your money in few days and sometimes even in few hours, then it may take some months to recover.

Ready? GO!

upcoming: two or three words about risk




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