7 Tips For People Wanting To Start Trading
Investing is what puts your money to work. The harder they work, the more you enjoy the fruits of their labour. So you have to think what are some of the ways you can invest in things that will get you your desired results. For some it’s investing in real estate, for others it’s businesses. Then there is trading.
There are plenty of products out there to help you achieve your goals. A bit of research and you will have lots of choices. But beyond that what do you have to be careful about? It’s not as easy as pressing the buy and sell button. You need some guidance so you don’t lose your shirt. Here are some quick tips to get you started.
As my disclaimer, this does not constitute financial advice. It is used to educate and entertain. Do your due diligence and make sure you know what kind of investments you’re getting yourself into.
It takes money to get into trading
This doesn’t mean it has to be your money. That time your uncle gifted you $100 could come in handy to get your feet wet in the market. Be careful about which type of products you choose to invest in.
There are stocks, options, forex, futures, etc. All these are good choices. Anything related to penny stocks, binary options and anything that seems too good to be true, stay away. Even if you wish to buy Amazon then it would be better to save up first.
The reason is that public companies listed on the index have a lot more volume that gets traded on them. This means there is a higher chance that you can get in at the price you want. And get out when the opportunity presents itself. Not to mention these companies are regulated by the SEC to protect you as the investor.
Always use a stop loss
This comes down to your personal goals. For every trade you wish to start you should already know when you want to get out. Next, you need the discipline to execute that plan. Nowadays almost all online self-directed brokers will offer these features. If they don’t, run for the hills.
You need to be able to control your trades even when you don’t have access to the internet. This is why you should make use of stop-loss orders. This will keep you in line with your goals.
Don’t be greedy or fearful
An old wall street saying goes: “Bulls make money, bears make money and pigs get slaughtered.” That’s because the first two have picked their position and they are sticking with it. About 97% of traders are bulls. They are the ones who ascribe to the “Buy low, sell high” strategy.
Pigs are those who get greedy. They leave discipline by the wayside. They take uncalculated risks because they think “it’s a good time to buy.” And they will be the ones complaining that things didn't go their way when the next crash will come by.
Practice on a demo account first
Before you think about getting your feet wet, you will need practice. Pilots don’t read a book and take control of a plane on their first go. They instead use simulators to get used to controlling a plane. This is the same.
Find out how the market moves and how its wild twists and turns happen. Spectators of the market are lagging too far behind those who are in it. It doesn’t compare at all. I would recommend being on a trading simulator for at least a year. Only then add your own money to it. Especially if you have no formal training.
Journal your trades
Practicing also won’t be enough. You will need to go through and recognize your own mistake. What are the patterns you are creating for yourself? How are you holding yourself back from making trading decisions?
These are all things you should jot down in your journal. Note when you go in, when you got out and why. Then add your notes on your mental state when you were doing so. More often, trading is all a mind game. Your mindset makes the decisions for you. Then adapt when you’re not on track.
This shortlist contains the bare minimum requirements to get into the market. Brokers such as RobinHood have made it extremely simple for anyone to invest in the stock market. That doesn’t mean that most of those people are making money. This is a zero-sum game. So for someone to make money, someone else has to lose it. Thus you need to be ready to pick which side you want to be on. Might as well be prepared if you want to be profitable.