Beginners'guide: What are the first steps to trading? |

Illustration: A stock-exchange beginner

Warren Buffett. A name. A legendary name! The name of a billionaire. So, what does he do? He invests in stock. The stock exchange is a huge topic, and a very exciting one. You can make your fortune or go to rack and ruin. Whichever way it goes for you, there’s no denying that investing is one way to improve your finances. So how do you start? How do you make money from it? Is it as simple as it looks? Or is it a minefield? How does a layperson take their first steps on the stock exchange without falling flat on their face? There is a mine of information out there but how do you separate the lies from the truth? You hear about stocks and shares but are they the only way to go? And how does trading fit into it all, what’s the link with the stock exchange? Warren Buffett isn’t a trader as such, more an investor. So what’s the difference?

This is a companion discussion topic for the original entry at

I would suggest that the first steps should be small cautious steps following a very clearly defined road map!

Regularly you can open a newspaper or magazine, or see online headlines, articles and advertisements that claim to have ‘3 Easy Steps to Trading’ or claim to show ‘How To Make A Million From Your Bedroom’ – I’m a pretty balanced and calm individual but I must admit I get more than a little annoyed (English understatement!) when I see them!

Thinking back to the trail of my professional background - studies, qualifications, working ‘in harness’ learning the trade, gaining experience, then branching out on my own - and all the while reading, studying and researching the core subjects necessary to make a successful career out of trading whilst keeping abreast of the latest stock market news and world events that affect stocks, I wish that there had been 3 Easy Steps but there most certainly isn’t believe me.

As mentioned in one of the previous forum postings there really is no substitute for discipline and diligence if you want to, not just start trading but also, make a success of it.

As Warren Buffet’s been mentioned it’s worth taking a quick look at his background and early days too.

His father was clearly an influence on young Warren as he had a brokerage himself and the son commonly observed his father’s dealings – what better way to immerse you in a subject from an early age. Buffet the younger’s confidence was such that he bought his first stock at just 11 years of age (no doubt under close tutelage) and then through his teens made several successful entrepreneurial ventures on his own.

He then went on to study business and securities at the University of Pennsylvania and the University of Nebraska to gain a strong foothold in the fundamentals of investing. The rest, as they say, is history.

What are the first steps to trading?

Advice is everywhere these days, in fact you can almost suffer from advice overload once you starting searching.

But perhaps the best place to start is with you.

Why do you want to trade in stock markets? Do you have a well-defined answer to this simple fundamental question? The myths spread by many include the much perpetuated one that it is an easy, sure-fire and exciting way to make a mint – it’s not! It’s not a hobby, it’s not a game, it’s a profession that needs to be worked at from the ground up over a great many years.

It’s never too early to start watching and studying the markets – see the example of Warren Buffet above. Every piece of knowledge acquired along the way will become a golden nugget one day.

A degree in economics, finance, mathematics or even business can always give you a leg up in the early stages of your career and will most certainly assist your chances of being accepted as a junior analyst at a bank or hedge fund where you can learn about products and markets in a live environment.

All the while soak up every snippet of information available, read, study and keep analysing your own progress and mind-set – is it still for you? Are you kidding yourself? Do you have the drive, discipline and mentality to stick with this learning curve for several years?

If all the boxes remained ticked then the pathway to moving to a senior analyst level and/or becoming an assistant trader - still under close mentoring – should allow you to establish a solid track record prior to starting to trade on your own book.