Now you are ready to take the next step by getting in touch with a broker and opening your trading account. Although this is a very exciting time, it is important to exercise caution and proceed slowly. The wisest decision you can make at this time is to establish your trading account with a broker who offers a trading program with a simulation package. Besides the necessary practice this program provides, there are other benefits to simulation trading.

Working on a simulation program will allow you to establish and develop a familiarity with the charts you may wish to follow and use. This is an area where the Edu-Trader™ software can be of great assistance. Edu-Trader software will provide you with charts you will use in your trading strategy, and will assist you in developing a watch list for your individual stocks. By starting with a simulation program, rather than starting live, you will be able to develop your skills as a stock or options trader in a no-risk setting.

Another benefit to simulating your trading is that it will help you become more proficient at proper money management. Understanding your trading capital is paramount to becoming a successful trader. It is absolutely imperative that you protect your capital as fiercely as a tiger protects her cubs. One of the most important ways to do this is to be comfortable with the dollar amount that you are willing to commit to any one particular trade. You need to be aware of the actual dollar investment of your trades, rather than merely focusing on the number of contracts or the number of shares which you are trading.

For example, if you are considering a directional-options trade and have about $20,000 in your trading account, one option may cost $3 per share, meaning that 10 contracts would cost you $3,000, whereas another option may be worth $9 a share, for a total trade value of $9,000 for 10 contracts. It is important that you do not become fixated on buying 10 contracts merely because that seems like an appropriate number. Rather, you should make the decision of how many contracts to purchase based on the total dollar cost of your trade, which must be an amount with which you are comfortable. If you are comfortable with a $1,000 trade amount and the option costs $3, buy three contracts; but if the option costs $9, buy only one. Remember, a successful trader does not act out of ego, but acts in accordance with a carefully thought out plan.

It is also very important to simulate your trading while you are developing your individual trading rules. The rules you develop will depend on your risk tolerance, as well as the amount of capital you are willing to commit to your trading strategy. Some of the points that are important to address in your rules are: an individual trade size, where to place your stop loss, where to place your profit target, which charts you will be analyzing, and how you will define the point at which your trade sets up for you. A successful trader always follows the rules that he has developed.

For example, assume that you have decided to watch five charts that are related to a stock that you are tracking. Let us further assume that one of your rules is the stock must set up on all five of these charts before you enter into a trade. It is a great temptation to enter the trade early, at a point where only four of the charts set up correctly. A successful trader will be patient and wait until all five charts have set up. He will not enter the trade unless they have. You will find that if you start breaking the rules you have established for yourself, it will be only a matter of time until you see your profitability suffer and your capital diminish.

The rules you implement for yourself, which charts you use, and how you manage your money are all individual decisions that you alone can make. As you are aware, one of the basic tenants of successful trading is the reduction of risk. By starting with a simulated program, you will be able to learn and develop skills in these areas in a very conservative and safe manner. The question then becomes how you will know when the time is right for you to move on from your simulated trading to actual trading. This is a question no one can answer for you. Your Mentor can assist you in making that judgment call, but ultimately, you are the only one who will know when the time is right. When you know which charts you will follow, how to manage your capital, and the rules that you will follow, and you are comfortable not only with your strategy, but also your execution, you will possess the necessary confidence to move on to actual trading.

Joe Inman is a stock mentor for Wealth Intelligence Academy™.