Basic Home Office Setup For Stock Trading

Computer System

Make sure your machine has a robust operating system, like XP, an up-to-date antivirus and firewall, and is powerful enough to process incoming data feed in real time while running half a dozen other applications. The last thing you want is to keep restarting a frozen system when you are trying to enter a trade.

Some traders opt for double-headed monitors or multiple machines. I find it unnecessary. There is such a thing as data overload. Your brain can only process so much information simultaneously, and increasing the amount of incoming data does not necessarily translate into better trading decisions. The key is to have as few vital inputs as possible to make quality decisions fast. Limiting yourself to one machine/monitor will force you to be selective instead of becoming a data junkie.

Internet

You need cable or DSL for the incoming data feed and live trade execution. That's one area where I would not skimp and would opt for a top of the line broadband package. This is the bloodline of your business.

Every provider has a problem every now and then - the key is how responsive they are to your needs. Some traders choose to have a backup dialup connection. I find it unnecessary as long as your primary provider is robust.

Broker

Some people want the lowest commissions, others - the most bells and whistles. To me the most important thing is how robust your broker's trading platform is. You don't want it to go down on the busiest trading day, when a 5 min. delay can cost you thousands. What difference does it make then whether you are paying $4.95 or $10.95? Don't count on your broker's ability to handle your trades over the phone in an emergency because you may not be able to get through as thousands of other frustrated traders will be doing the same.

Other considerations:

Your needs may vary and will change over time, so make sure the broker meets your current needs. For example, if you are a beginner, you may need your broker to walk you through different features; whereas a more seasoned trader would opt for fast execution instead.

How responsive is your broker to your concerns? If they don't appreciate your business, no matter the size, I'd look elsewhere. On the other hand, if you are happy with your current broker, there is no need to switch for 10 free trades. You can use your loyalty and the cumulative business as a bargaining chip to extract concessions and freebies every now and then. Also, you never know when YOU will screw up big time - so having the broker on your side is a plus.

Trading Account

Minimum opening balance requirements vary from broker to broker and are generally pretty low but it's best to get approved for a day trading account with $25,000 equity, if you can. You may not want to day trade but even in position/swing trading there may be situations when you have to get in and out of a stock several times during the day, or make partial trades around your core positions. If you are not approved for day trading, your broker will flag you as a pattern day trader and restrict your trading privileges. You don't want to be unable to exit a losing position just because you have had one too many trades. Even if you don't want to put the entire $25,000 at risk it's best to consolidate your balances to get the approval and only trade a portion of the account.

Charting Software

Your brokerage account should come with a trading platform that includes charting and other bells and whistles. Don't rush out to buy any extras online: you can spend a fortune on what you think you need, which is generally not vital or is available for free.

Sources of Investment Information

One thing I would strongly advise against is CNBC or any kind of financial TV program. They distract and generally add no value. It's important to have good sources of information but it's best to go there on your terms.

So how do you choose what you need?

One thing is the trading system. There are many good ones but none is perfect or works 100% of the time. Pick the one that suits you best. That will determine the input you need.

It's hard to recommend specific sites because things change so quickly. What was good just a few weeks or months ago may deteriorate quickly. One thing you may want to do is join an online stock picking group to pick other traders' brains. You can find out which sites they currently use, what works for them, and study their picks - all for free.

Try to avoid information overload. One of the consequences of a low entry barrier to online financial services is an abundance of information. You can spend the entire day reading financial sites and at the end of the day won't be any wiser or better off. The key is to make profitable decisions with as few vital inputs as possible.

One last thing: the key in the "home office" is OFFICE, not home. Make sure it's a comfortable and quiet place where you can work without interruptions. You may have seen those TV images of happy people trading casually on a laptop in the kitchen, in the neighborhood coffee shop, or handling unruly kids while doing laundry and trading. Not true. Trading requires focus and concentration so you can gain every possible advantage.

Slav Fedorov is a full time stock trader and founder and managing member of TradingZoom, LLC - a provider of timely stock picks in small caps based on proprietary selection methods. http://www.tradingzoom.com

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