What every first-time trader needs to know

You’ve signed up to an online trading platform because you want direct control over your investments. You’ve opened and linked a Cash Management Account (CMA) – now it’s time to trade.

Self-directed online trading is easy and quick – and you can do it on the go. You can use your smartphone to monitor your investments in real time and place orders to buy and sell in nearly instantaneous transactions on ASX listed shares and Exchange Traded Funds (ETFs).

Your online trading platform is simple to use and designed to take all the hassle out of the trading process. At the end of the financial year, it will even send you a report for tax purposes, which you can forward to your accountant.

That said, you shouldn’t start trading until you’ve figured out how to use your online trading platform effectively.

Before you start

  • Make sure you have enough money in your CMA

    Every time you buy or sell stocks, the money comes out of or into your CMA. It’s a place to park your money while you think about the next purchase.

    Once you start trading, you want to ensure you have enough cash available in your CMA to make a smart trade as soon as your research spots it. In the world of online trading, every second counts. Market opportunities come and go more quickly than you think. You may not have time to scramble to move cash around.

  • Do your research

    Choosing shares to buy and sell requires research and analysis. As a beginner trader, you might want to start by checking out your platform’s tutorials, guides and glossaries. You can also check out our 5 questions to ask before you invest in a company article.

    Next, familiarise yourself with all the different information feeds. Your online trading platform will give you access to ASX announcements, comprehensive company information (including financials) from Morningstar and the latest news from Dow Jones. You’ll also find broker consensus recommendations, which tell you when four or five houses all start focusing on the same stock.

    Once you’ve honed in on a particular industry or company, you can filter your online trading platform’s news services to bring you relevant breaking stories on the news wires. You can also set up SMS or email alerts for company announcements or specific stock movements, so you’ll know the moment a share has reached a particular price.

    Some of the most useful research tools on your online trading platform are the advanced charting functions. These create helpful visuals, so you can easily compare stocks and monitor their performance over time. You can look at historical data and read analysis to help you decide whether you think a stock would be a good investment.

    If you’ve picked out some potential ‘buys’, you can also create your own watchlists so you can quickly view live pricing, research and market data points for any stocks you're interested in.

  • Understand how to use your online trading platform's tools

    Your platform also has a number of advanced order functions to help you stick to your investment strategy without needing to be glued to the market all day. These functions let you set rules for and automate your investment strategy, so the online trading platform essentially trades for you according to the orders you’ve given it. For example:

    Conditional orders – allow you to create an order for equities, interest rate securities and warrants in advance with pre-specified 'trigger conditions'. Once those conditions are triggered, the order is automatically entered into the market and you receive an email or SMS alerting you to the trade.

    When you start, you’ll probably use simple triggers: “Buy ‘x’ amount of BHP shares if the price drops to $x”. As you gain confidence, you can create conditional orders with a trigger price based on a specific percentage of the previous trading day's open, high, low or close price. Or you can place a buy or sell order when volatility suddenly increases above historical levels for a stock you are watching or that you already own.

    This means you can plan for future market conditions and capitalise on potential trading opportunities by taking action in real time to manage your portfolio – even while you’re away from your computer or phone.

Once you’ve got the hang of it, online trading can be easy and quick. But, as with any investment strategy, it comes with risk. Unless you’re a well-informed investor, it can be challenging to analyse the markets and figure out when and what to trade. If in doubt, seek help from a financial adviser.

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Additional information

Unless stated otherwise, this information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL & Australian Credit Licence 237502 and does not take into account your objectives, financial situation or needs. Before making any financial investment decision or a decision about whether to acquire a credit or lending product, a person should obtain and review the terms and conditions relating to that product and also seek independent financial, legal and taxation advice. All applications are subject to Macquarie’s standard credit approval criteria.