Getting Off The Ground: Costs and Investments To Become a Trader
If you are ready to take the first steps, hold on. There are a few questions to ask yourself. The biggest investment is not the one that most new traders think of first.
Let’s start with the basic questions. Do you know what you are going to trade? Your answer to this will have an impact on your costs. What do you know about trading right now? How much money can you afford to spend to set it all up and most importantly how much can you afford to lose?
Let’s explore in detail what you’ll need to get up and running when you start from the very beginning.
What You Will (Probably) Need To Pay For
This can be broken down into five items: internet, hardware, software, brokerage fees, and data costs.
It goes without saying that the most basic items you will pay for are an internet connection and a computer. Make sure you have a good one with plenty of RAM. The Bookmap absolute recommended minimum is 8GB for a PC, but that won’t get you very far. For even light trading you will want something better.
Fortunately, you don’t have to go the route of putting together ten or so screens. Start with a simpler workstation setup and build up from there. A fallback laptop is also useful for emergencies.
Can you use just a laptop and WiFi? Sure, but it really depends on how you trade and what you trade. Swing traders, for example, mostly modify orders and check positions at the beginning and end of the trading day. Scalpers, on the other hand, spend much longer in front of a screen and require some serious, high-performance equipment, if only for their own sanity and comfort.
There are two types of software.
Those that get data, process it and allow you to see what is happening in the market, and those that send orders to brokers and allow you to trade. It makes sense to get an all-in-one package. .
Besides hardware, there will also be software costs. This means paying for good quality charting software. This is essential. Your trading decisions depend on what you see, and how easily you can analyse patterns and trends, and identify opportunities. Also, if you are trading stocks, you may also want a stock screener. We come back to the question of what you want to trade. Bookmap, for example, offers a basic, free package for cryptocurrencies.
Market data is the next cost. It is at the base of all trading decisions. You will almost certainly need real-time data and that can be expensive. It is a fixed monthly cost but some brokers will offer free market data as part of a package.
Which brings us to the final cost: brokerage fees and commissions. Brokerage fees are variable depending on what, how and how often you trade. Fees can be flat or a percentage, there may be minimum deposit requirements and so on. There are some that offer 0% commissions for crypto. For brokers, it’s a hard decision and it pays to shop around, but the bigger, established players offer security.
Invest in Learning
Real-life trading is not the time to find out you lack knowledge in something.
As a beginner, your first and foremost task must be learning the basics of market theory, trading strategies, and foundational technical skills. You must do this, even if you think you know them!
Bookmap’s short training courses on the basics is a good place to start. These are all free to all. There are others available through various academies and learning centers.
It is also best to join chat rooms and communities of traders. It gives you exposure and expands your knowledge like no other. In addition, members have often already asked the same questions you have. Bookmap has a large and active Discord community. There are many others as well, including Reddit.
Learning is extremely important. We have a series of interviews on our blog from traders and they always emphasize this point. If you want a real-life example, read this interview with a successful trader and Bookmap user. He studied hundreds of YouTube videos in the beginning and later in his career went back to the basics in order to get the most out of Bookmap.
Practice, Practice, Practice
This is an investment in time. When you’re ready to start, it’s easy to overlook this step, but spend as long as you can on it.
Try demo and simulation accounts and follow leading traders or, if you can, get a mentor. A few traders prefer to start with copy trading for their first tentative steps.
Bookmap has simulation and replay modes that are very useful. You can use the simulation mode to start back-testing your strategies. Practise enough to be in a position to answer the question “Do I have an edge now?”
Start trading with small amounts. This seems obvious, but some people do not do this! Even the pros: Jtrader, a Bookmap streamer and well-known trader, lost everything in his first month.
Ready to Go, But Wait!
What money do you have set aside for trading? The amount of money you are willing to trade with can play a role in deciding how and what you will be trading.
For example, the pattern day trading rules for U.S stocks require a minimum account balance of 25,000 USD. Although this is one of the highest you will encounter, for some, such requirements affects what they can and want to trade, at least at the beginning. Needless to say, such rules are different in every country and you should check if any similar regulations apply to you.
On the other hand, for those with less capital, there are options such as crypto or nano-futures or other instruments.
The Biggest Cost
As you may realize by now, your biggest cost will be your investment in time. Invest in learning! The more you spend time in understanding the fundamentals of trading, the higher your chances of surviving and being profitable.
Take your time. Learning and practising will avoid many headaches later. A great place to learn is the education section on Bookmap’s website.