If you’re unfamiliar with how the stock market works, or if you just started learning but never got around to actually investing, stock trading can be intimidating at first.
The truth is, with the wide variety of tools at our disposal today, trading stocks successfully has never been easier. However, that doesn’t mean stock trading is a walk in the park and that everybody who gets in will make it.
But with the proper set of resources, almost anybody can start trading successfully, even if those resources are limited. Here are the steps you need to get through to become a successful investor.
1. Get The Knowledge
The first thing you should do is get a solid foundation before you get started. There are tons of different ways to approach the stock market.
Some will follow prominent analysts and copy their strategies. Others prefer to go with their guts and trade the news. Others might prefer to go with in-depth analysis.
Most online brokers will have an educational component that will teach you the nuts and bolts of the stock market.
Some of them will even have offices where you’ll be able to discuss with an expert one on one. Or you could go on trading forums and discuss with other expert traders and soak in the knowledge.
Choose the trading style that works for you, invest what you can afford to lose, and don’t be afraid to make mistakes.
2. Find a Good Online Broker
There are tons of great online brokerage services that will allow you to make trades.
You have the choice between discount brokers and full-service brokers. Full-service brokers will usually cost much more but will come with many more advantages.
A full-service broker might give you suggestions on individual stocks, provide added research, and give you more one on one attention. But they’re usually not the best if you want to make a lot of trades.
A discount broker, on the other end, like eToro for instance, will usually be a better choice for new investors. eToro is a social trading platform that combines the benefits of a full-service broker by giving you access to tested and true leading traders enabling you to copy their strategies while offering low fees on trades.
Social trading is bar none the easiest way to start trading stocks and allows you to try multiple strategies and finding one that works the best.
3. Know What Kind of Trader You Are
There are usually two types of traders: those who like to hold onto stocks they believe are promising and get paid off dividends, and those who’d rather trade based on market movements and volatility and make quick gains.
If you’re that kind of trader, then you should be looking at a broker with low execution fees. But if you’re more of a holder, then a full-service broker might be the better option.
Read also: Unusual Ways of Investing Your Cash
4. Trading with The Trend
Are you the kind of person who likes to follow the crowd, or are you someone who can lead?
This might seem like a simple question, but it’s something that you’ll need to consider very carefully if you’re planning on getting involved with the stock market.
In general, no matter how intelligent you think your purchasing decisions are, it may be best to avoid being a trendsetter until you’ve had plenty of practice, and you’re more open to risk.
The more you go against the thoughts and feelings of the wider crowd, the more you’re putting your money at risk, by betting that you know something the rest of the community doesn’t.
Obviously, taking this stance puts you in a position where you can earn some big benefits. But there’s a lot of risk for loss too. A simpler solution is often to trade with the trend, until you’re confident enough to strike out on your own.
Following the Trend
Ultimately, trading with the trend means that you take the opinions of the majority into account when making your purchasing decisions.
If you notice that stocks for a particular company are beginning to trend upwards in price, then you’ll get involved and buy before the assets reach their peak value. When prices begin to fall again, you’ll sell as quickly as possible to avoid a loss.
Many amateurs learning the ropes for the first time find this process extremely helpful. Although they won’t always make huge amounts of money by following the crowd, especially in penny stocks with low startup costs to get involved, they can begin to find their footing when they go with the flow.
For instance, if you focus on following the trend in the technology industry, you’ll eventually begin to notice some of the things that might happen before a company’s share price increases or decreases.
You might realize that whenever a new member of executive staff is announced at a company, there’s a spike in share price, which quickly tapers off again. This could be an excellent time to sell if you were thinking of closing a position anyway.
Should You Always Trade with the Trend?
Following the crowd can be a good option for beginners who aren’t looking to make any huge investments or earn a lot of cash overnight.
The idea is that you’re trusting the expertise of a huge community to assist you in making your purchasing decisions. If thousands of people have already deemed an asset to be valuable, there’s a good chance that it has some growth potential in it.
However, the key to success is getting in on the crowd activity at the right point. If people have been buzzing over a particular security for months before you make your first purchase, there’s a good chance that there isn’t a lot of growth opportunity left for you to take advantage of.
Look for opportunities to join the flow at the earliest possible time. The more you develop your skills and your knowledge, the more likely it is that you’ll notice chances to make cash before others.
Trading doesn’t have to be intimidating, and with the proper knowledge and expertise, it’s possible to make good gains with the proper strategy.
Make sure that you stay disciplined and never stop learning and experimenting, that’s the only way you’ll actually become a successful trader.