Taking the plunge into investing in the stock market can be a little daunting for first-time traders. What should you be buying? Which markets should you be looking at? How should you structure your portfolio? What is the best strategy to follow when picking your stocks? All these questions and more will no doubt be paramount in your mind as you begin your trading journey.
Luckily, being able to answer all of the above and become an experienced trader is not that difficult. It simply requires some hard work and patience to get to the level you want to reach. It is vital to spend time figuring all this out as simply jumping in unprepared is a recipe for disaster. Just remember that investing in stocks is a simple concept – you are finding companies in which to purchase shares that you believe will increase in value over time.
Trading on the stock market
To start with, it is necessary to look at the things you should be doing as a trader. Below are the main elements that will help you start your investment career off in the right way.
- Acquire knowledge – as noted above, you cannot just start trading on the stock market with no idea of how it all works. All the questions that were posed at the start of this article can be answered but only by educating yourself. Take the time to read books by experienced investors, get advice in person from any traders you know, check out video sharing sites like YouTube for advice, and search the internet for informative articles.
The online forums are a real treasure trove of investment advice. The best traders forum will allow you to get any questions that you need answered by more experienced traders. They will also give you a lot of information on mistakes to avoid and the latest market news to take note of.
- Do diversify – a great tip for any stock trader is to invest across a range of sectors and companies. Don’t put all your cash into one trade or one specific sector. Trades can quickly head south, and sectors can quickly crash before you can react. By spreading your risk across a range of sectors and investment types, you are protecting yourself from that eventuality.
- Do keep some cash savings – although your main activity may be investing in stocks, you always will want some cash savings for life’s emergencies. You just do not want to be selling off well-performing shares to pay for a new freezer or car. Keep a sizeable sum in cash savings to use when needed.
What shouldn’t you be doing?
As well as knowing what to do, you also need to be aware of the mistakes to avoid. These are the worst errors to make:
- Don’t let your emotions take over – this is perhaps the most important but hardest trading tip to follow. Emotion is the enemy of successful trading and needs to be left at the door each day. Don’t panic when a share price goes down and sell immediately – it may shoot back up the next day and go on to make you lots of money. Similarly, don’t fall in love with a share that you have factual evidence to show is not performing and is unlikely to pick up. Always make rational decisions based on hard facts.
- Don’t get caught out by fees – a big part of trading that some investors forget is the fees involved. This could be fees to your advisor or transaction fees on the trades you make. Over the year, these will add up and need to be factored in when working out if a trade is worth opening or not.
- Don’t repeat the same mistakes – it is important to keep going as a trader, but you shouldn’t be making the same mistakes that lose you money over and over. Each losing trade should be looked at rationally to see what went wrong and how you can avoid it happening in the future.
Get up to speed before you start trading
Hopefully, the above has given you a few pointers in becoming a successful trader on the stock markets. It really is key to think about all this before you risk any real money and only start to trade when you feel sure you know what you are doing. That will see you have a clear strategy in place that will give you the edge you will need to profit overall.
