Technology and the internet have made stock trading easier and more accessible. The old image of stock trading where stock traders would be in an office, frantically on the phone with analysts, while screaming to colleagues is no longer the reality. Today, people can get into the stock market, trade online, easily access relevant stock trading information, and trade different stocks. There are many online trading platforms to choose from. For instance Alpari stock trading allows you trade major company stocks like Alphabet, Facebook, ExxonMobil, and Microsoft. There are so many possibilities now available to people.
However, it is important to understand the basics of stock trading and how to get started. First of all, you should understand why you should invest by trading stocks in the first place. If you have money to invest, trading various stocks like the major company stocks mentioned earlier enables you diversity your investment portfolio and reduce risk. When you trade, it is best to buy major company stocks as well as stocks from small companies that you have researched, and that you are convinced the company and its products have great potential. When you buy different types of stocks, you reduce your risk. Eventually the high gains from some stock help grow your portfolio and secure your investment.
Another reason to trade in stocks is the opportunity to make both short-term and long-term investments. If a trader chooses to, they can trade short-term stocks and make quick profits.
To succeed it is important to understand the basics. So here are some tips for stock trading success:
1. Become Your Own Stock Analyst and Conduct Research
A successful stock trader will carry out research on companies, stocks, new products, company strategies, as well as government policies that will affect the value of stocks. All this information helps you make informed decisions. Warren Buffett has famously said that he studies the companies that he invests in and understands them. He first of all understands the company, its products, the direction of the company, and makes a decision if it is worth investing in. It has helped him find value in places where it was not apparent to regular people.
You can start your analysis by focusing on one industry sector and a few companies within the industry. A proper analysis will include an analysis of the company financial statements as well as information about the company reported in the news, and published by independent sources. You would also take a close look at the company’s competitors, key customers, and trends in the market.
Finding valuable and credible information is vital to your decision making. Some factors you would consider are weaknesses and strengths of the company, opportunities and threats, main competitors and their actions, new research, new products, government policies that will affect the industry or the company’s products. These factors put together tell a story that allows a stock trader make informed decisions.
A stock trader should not totally disregard the forecasts and analysis of professional stock analysts; however you should get enough information to understand the analysis of professionals.
2. Use Your Capital
Some brokers offer credit to stock traders and this credit are called margins. Only experienced traders should take advantage of margins because in event that your stocks perform poorly, you may end up in debt. It is therefore advisable to use capital and grow accordingly rather than get into crushing debt and flop, and crash out of stock trading.
There is also the psychology of trading with free money. It can make a newbie or beginner misunderstand what stock trading is really about. Stock trading is first and foremost a form of investment. It is healthier to begin with your own capital.
3. Remain Objective and Be Strategic
Stock trading entails speculation. A successful trader should strategize, select positions, and make the calls based on research and analysis of prevailing market conditions and not on emotions, hope, or hype. It also raises the issue of detachment. A good stock trader should practice detachment as far as the company, products and brands are concerned. Utilise real objective information and not conjecture or company hype to make decisions on what calls to make.
4. Learn Lessons as You Build Your Portfolio
After each trade, take the time to conduct a performance analysis to ascertain how the trade performed. This will help you determine if your research sources are accurate, and if the analytical method you use to determine your calls and select your positions is valid. You can learn a lot about what to include or exclude from your trading process and strategy development by conducting your post-trade analyses and objectively using the information you glean from it.
5. Invest In Yourself
Whether you are business inclined or not, you can improve yourself by investing in your mind. By reading investment books, business books, and books on personal development you can learn in a month what has taken other experts years to discover. Apart from books, there are many seminars, webinars, and courses on stock trading. Gain financial literacy and understand business concepts. In addition, work on your productivity, emotional intelligence, and personal leadership. When taken together, these resources can help you become a successful stock trader.
6. Establish Risk-Tolerance and Be Realistic
When trading stocks establish a risk tolerance; the amount, degree or percentage you will be comfortable losing. It is important when you invest to establish the degree of the swings you are willing to deviate from the value of your investment. When you establish the risk tolerance you will avoid panic and you can stay realistic and focus on making trades. This also suggests that you should determine what your investable assets are, and what you are willing to invest and possibly take losses on. A stock trader should not invest more than their investable assets.
Institutional investors and aggressive investors tend to establish a higher risk tolerance than the average stock trader. They often take on maximum risk with a plan for maximum returns on the investment. There is a possibility that such investors not only know what they are doing, but have the assets to cushion steep losses. Stock traders who are new to trading would benefit from applying more caution and establishing a low or moderate risk tolerance.