TradeSmart University

7 Essential Trading Tools You Must Have

As stock and options trading grows in popularity, it is easier now than ever before to become a trader. And we have a shortlist of seven essential trading tools you need to get started.

Start with Education.

Knowledge is one of the most important resources a trader needs. Understanding the foundational knowledge of the stock market, why it works, and how you can profit from it is just the launching ground. Even seasoned, professional traders continue learning as it helps to keep your thinking sharp and avoid the creeping in any unintentional bad habits in your trading.

​​​"An investment in knowledge pays the best interest." - Benjamin Franklin

​The great news is we are living in the information age where trading education comes in a variety of formats and can be accessed nearly instantly. Here are a few trusted resources to help get you on your way:

​Books

Around TSU, we tend to go old school as we like the feel of a hard-copy book that we can dog-ear and highlight. However, most books on trading specialize in one specific area, which usually works well for continuing education but can be confusing and overwhelming for a beginning trader. But if you are like us and want the feel of a printed book in your hands, then check out our post on the Ultimate Trading Library for some excellent book suggestions.

Search

For quick help on a specific topic, there is a treasure trove of knowledge at your fingertips via the internet. Investopedia.com can be a quick guide as needed and is a default favorite, but the downside is, your vocabulary needs to be precise. Thus, we tend to use search tools to clarify a specific topic instead of looking for general information on trading.

Online Trading Education

​One of the fastest-growing, most popular ways to learn is through online schools. Your online trading education should walk you from point A to Z, giving you a complete understanding of trading and a model system for trading that you can adapt and personalize. When searching for the online trading education that will serve you best, consider schools that have a combination of on-demand content and live instructors. There is an exceptional value to showing up and asking questions or requesting specific examples of principles being taught.

Brokers

Brokers are the bridge between you and the stock market and are a mandatory part of the trading process. Broker platforms are where you will deposit your trading cash and execute your trades. However, some brokers are more welcoming to individual trading than others. But the good news is there is a diverse range of brokers available to choose from, and here are a few things to consider when searching for a broker:

  • Commissions - ​These can vary widely. Make sure you know how much it will cost you to place a trade.
  • Hidden Fees - ​Brokers love to add on extra fees for platforms, administrative, position adjustments, and more. Make sure you are aware of all fees.
  • Data Quality - ​Almost every broker will promise "live streaming data." Be sure what you are receiving is actually "Level 2 Quotes."
  • Customer Service - ​Make sure a human being will answer the phone when you call. The last thing anyone wants is if you need help closing a trade, and all you can get is a machine on the other end of the phone line.
  • Minimum Account Balance - ​Some brokers will require you to maintain a minimum balance on your account.

It is good to know that every broker in the United States will ask you for a social security number and financial information as required by law. Therefore, it is good to think of signing up for your broker, like signing up for a bank account. If communicating that information online makes you uncomfortable, please give them a call as it will be an excellent chance to test their customer service. Every person has to choose a broker if they wish to trade, and below is a list of brokers the majority of our TradeSmart students lean towards using.

Most of our Canadian friends tend to choose either of the following:

Trading Capital

You would be surprised by how many people complete their education, set up their broker account, and then realize that they are short the cash to fund their trading account adequately. The good news is you can fund a trading account with as little as $5,000, and even if you need to raise funds, we have a few suggestions for helping you along.

  • Sell some stuff - I have yet to meet a trader who couldn't find $5,000 worth of stuff in their home or garage to sell. So, take a look around your home and see what you can sell.
  • Pick up a side hustle – Find a side hustle to make a little money and use it to fund your account. Companies like Uber and Doorstep Delivery have changed the way people can make some extra cash and are easy to start doing.
  • Rent your stuff - Rent your house or car out for a weekend.
  • Direct Sales – Years ago, Avon used to be the king of the industry; however, today's direct sales model has entirely reinvented the industry model with exceptional products, training, and opportunity.

Charting & Analysis Software

Trading has come a long way from the days when Charles Dow plotted price graphs on a chalkboard with a straight edge. Now traders can analyze a company's stock chart with traditional support and resistance drawing tools with the click of a couple of buttons. If you prefer to let the computer do the work, many platforms are using artificial intelligence to assist you in analyzing and understanding the price graph.

Two of our favorite free resources for charting are StockCharts.com and TradingView.com. Free charting is decent while you are learning the basics of trading; however, you should expect to upgrade your charting tools when trading real capital. After all, the market for charting software ranges widely in price from $60,000 annually to $169 monthly. But if you are a freshman trader, it makes more sense to start with software like ThinkorSwim, TradeNavigator, or TradingView.

Data

You may have the most powerful charting and analysis software in the world, but without reliable data, it is worthless. It should be noted; the stock exchanges charge their data as it is a huge revenue generator for them. As with any free market, some data providers compete on quality, some compete on speed, and some compete on price. Remember, you get what you pay for, and for example, free data that is free comes with a downside of being delayed or inaccurate, which can be detrimental to your trading.

​If your broker or charting software gives you free data, check to see if you can upgrade to premium data. Some charting and analysis software build data fees into the monthly fee to keep things simple for their customers. If you are in doubt about your data, pick up the phone, and ask. It is essential to know what type of data you are using and how fast it is getting to you.

Market Research & Briefings

A reputable market briefing can save you hours of analysis and provide deep insights into the market. Outside analysis will help you to keep an open mind and consider alternative opinions regarding sectors and companies. There are a variety of research tools which you can pick from, and a few that cater to beginner-intermediate traders are:

Remember, you get what you pay for; so, when it comes to free trading advice or a sudden hot stock tip, be very skeptical of the advice. Often, tips like this are promoted marketing ads, and if you check the fine print, if there is any, they received a commission to market that particular stock. To be safe, stick with one of the services listed above.

Bonus: Journal

​Champions learn from the past, train for the future, and execute flawlessly in the present. A good trading journal should help you accomplish all three. Some traders keep an Excel spreadsheet, but there is an exceptional value in writing your trades by hand. Try it for a month and see if it makes a difference. Here are a few of our favorite tools for a trading journal:

​In closing, trading is a great activity, a great career, and can be a financially lucrative past time. However, like any field, you need to have the right tools in your toolkit, and the seven tools we listed above should help you well on your journey.