What Trading Tools Do I Need Before I Start Trading Online?

Online trading provides an excellent opportunity to make money. Like any money making venture, it requires investment capital, as well as sweat equity.  Not only do you need money to trade, but you also need to know how to trade. To trade, you need to understand the different type of online trading tools that are available to assist in your venture. Trading is a business and it’s not gambling. While luck might play a small part in your success, the hard work and research you perform could potentially determine if you make money or not. Before you make your first trade, you need to make sure you have all the tools you need to drive your success.

A Trading Platform

To execute a trade, you need a broker. Nearly all brokers provide access via an online trading platform. The platform will allow you to execute trades as well as monitor your positions.  You will also be able to watch your balance.  Many trading platforms also provide online trading tools. A trading tool is a mechanism that allows you to find trades and manage risk.

Technical Trading Tools

Part of finding successful trades is to analyze situations to determine if they have worked in the past. Technical analysis tools help you perform technical analysis which is the study of past price changes. Your trading platform will likely provide dozens of technical analysis indicators, which are very helpful online trading tools.  These indicators will point out when a trend is occurring, or momentum is accelerating. You can also decipher if an asset is consolidating and trading sideways. They will also tell you when the price of an asset is overextended, which can be overbought or oversold

Each tool will help you with your trading strategy. There are two key parts of a trading strategy. The first is when to enter a trade, and the second is when to exit a trade.  It’s imperative that you determine both before you execute your trade. An important tool to use is a chart, which provides you with a picture of the asset you’re trading.  The tool that is helpful with a chart is trend lines, and horizontal lines as well as moving averages. These instruments define support and resistance levels which can assist you with trade entry as well as your risk management.  You want to make sure you have a robust charting package as part of your online trading tools.

Fundamental Trading Tools

An assist is driving by fundamentals over the medium to long term, while the short term is governed by market sentiment and can be followed using technical analysis. Understand the current news environment, as well as the economic backdrop, is a very important tool. You should formulate your ideas and account for macro events as part of your online trading arsenal.

Before you place your first trade, make sure you have all your ducks in a row and understand the online trading tools that are available. Once you have checked off all the boxes, you can formulate a trading strategy and test it out.