Protecting Your Stock Trading Business Before It's Even Begun

Copyright (c) 2010 John Howell

Wouldn't it be great to have your own stock trading business? One where you could make a living just by trading at home full time? Well, for some people, it's already a reality.

If you're thinking of getting started in the stock trading business, there are a number of steps you can take to protect yourself and your assets before you begin. Any business, even an at-home one, should have a solid foundation of capital, but we know you'll have to work hard at that 9 to 5 you've probably got in order to get started. Taking a few appropriate steps now before you start will lead to a happier investor in the long run.

Practice, practice, practice -- Before you start your stock trading business, it's important to practice. Fortunately, the internet is a great place to get started. You can sign up for a practice account and paper trade to your heart's content.

Most of these accounts, often called 'fantasy stock markets' let you trade in real time with fake money. You'll get a set amount of play money to start. You then pick out a variety of stocks that you want to trade. Then, as you learn what to do and what not to do, you can trade without worrying about losing your hard-earned capital.

Many of these sites will give you updates on your progress through charts or graphs. Make a habit out of looking at these at least once a month to see how you're doing.

It's advisable to paper trade for at least a year before you jump headlong into the stock trading business, but you should practice until you feel comfortable committing your own funds to it. For some that might be as little as 3 to 6 months or as long as two years.

Next, the second most important thing you can do before you start your own stock trading business is to save. We've been told it so many times it sounds redundant but it's true: Don't quit your day job until you've got at least six months living expenses saved up. This savings should be above and beyond what you've already saved to commit to your stock trading business. No one likes it when their spouse is breathing down their neck about whether they'll be able to pay the mortgage that month, so don't let that be you.

Also, it's a good idea to make sure you have the right insurance before you begin. Just like with starting any business, take a look at your car insurance, health care, and homeowners policies to make sure you have the right amount of coverage before you begin. If money is tight, one accident, health scare, or major storm could bankrupt your capital fast.