Practice Your Skills
Learning to trade begins with education. Reading the news and financial websites, listening to podcasts and watching investing courses are all excellent ways to gather information. Joining a local investment club will give you the opportunity to discuss your education with more experienced traders. A list of some recommended resources is available at the end of this article.
However, reading is no substitute for experience. A zero-risk way to practice your new skills is with an online stock simulator, such as those available through Investopedia, MarketWatch and Wall Street Survivor.
Another option is to practice trading in the penny stocks market. Many companies offer stock shares valued at a penny a share, which makes it easier to practice leveraging the trends of the market and making a profit.
Tips For Beginning Investors
Online stock trading may be daunting for beginning traders, but with the right foundation and a gradual investment of funds, you can expect to see significant returns. Here are a few tips to help you make smart investment decisions.
Do not invest money you cannot afford to lose. Make intelligent decisions about what you can afford to invest, and begin slowly. Once you have realized gains from one or two stocks, you can begin to reinvest those gains — which have now become your principal — into other stocks and funds.
Diversify your investments. While stocks offer the attraction of seemingly easy money, they are unreliable sources of income. Consider investing at least a portion of your money in an electronically traded index fund, which holds many stocks. ETFs can be purchased and traded like stocks, but because they are diversified, losses in a given sector may be cancelled out by gains in another.
Don’t trade if you don’t have time to research. Stock trading should be approached as a part-time job. Like any job, your skills will suffer if they are not frequently practiced. In this case, “practice” means reading the latest news and financial reports on companies in which you are considering investing. If you do not have time to practice, consider investing in an index fund instead, or hand your investments over to a qualified professional.
Make a plan. Irrationality is the enemy of stock trading. Before buying a stock, consider what circumstances would lead you to sell it. For example, you can decide that you cannot risk more than 20 percent of your investment. Many brokerages have the ability to schedule buy and sell orders based on predefined criteria, such as a percentage drop (or increase) in your original investment. Scheduling limit orders takes the emotion out of your finances.
“Have a plan and stick with it,” Beauregard said. “Know why you are buying a particular security, how much to invest, what your expected return is, and have an exit strategy.”
Don’t buy high. Stock may be trending upward at an extreme pace, in which case you shouldn’t always jump to buy stock. Wait for opportunities to get a lower entry point.
Don’t give in to fear. Something many beginning stock traders deal with on a daily basis is the fear of losing money invested. While you may see stock values plunge for a company, don’t despair or pull your money out. Stock trading is a long-term investment and requires patience and perseverance.
Recap
Remember, reading online articles does not make you qualified to trade. Set aside six months to practice trading with real-world data before investing your money. Read the classics of investment literature. Watch or participate in a class on finance and investing on YouTube or through a massive open online course (MOOC).
This article was originally published on Business News Daily.