Friday, November 11, 2011

Beginning Traders: Reading List and A couple of Brokerages

If you're just getting ready to trade, here are two books I'd fervently suggest you start with before you actually start trading:

Trade Your Way to Financial Freedom by Van K. Tharp. If there's a flaw in this book, it's that he makes trading look too easy. But he's excellent on 'position sizing', which is the sizing of each trade to make sure your maximum loss is something manageable (like 1 or 2% of your total trading account).

Trading for a Living, by Dr. Alexander Elder. This gentleman gives you more of an idea what you're up against when you start to trade (the whole world!) and is not just a trader but a psychologist. His analysis of the reason that paper trading isn't really such good practice for real trading is particularly fascinating.

That being said, it's helpful to learn the mechanics of trading before risking real money. For that reason, most online brokerages will let you paper trade (some call it virtual trading) to see how their systems work. But once again, you won't see how your internal systems work until you are risking real money on a trade.

Two brokerages I have used are OptionsXpress and ThinkOrSwim. Each will allow paper/virtual trading. But beware: OptionsXpress's 'profit/loss calculator' is not always accurate; I'm not sure about ThinkOrSwim, but I think it's more accurate in this respect. If you don't like either of these, the "woods are full of them." Try another!

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