7 IMPORTANT THINGS IN TRADING, BEGINNERS SHOULD KNOW

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One very challenging thing for beginners in stock market investing is identifying where to start learning.

There are no formal schools about trading and mentors (the legit ones that is) are quite rare.

If you’re lucky and were able to spot a mentor, chances are their fees are far more than your entire portfolio.

Fret not, in this write up we will enumerate some very important things that you, as a beginner, should know. Just keep in mind of these things and use the internet for further and more comprehensive study.

1.) UNDERSTAND HOW THE STOCK MARKET WORKS.

Before trying to learn anything about the stock market, learn the basics of the basics first.

A good starting point would be questions like “what is the stock market?” or “how does the stock market work?” or probably “why do companies sell shares?”.

Investing in the stock market without knowing its concepts is just like doing surgery without knowing anything about anatomy.

2.) FOCUS ON IDENTIFYING YOUR TRADER/INVESTOR IDENTITY.

A lot of people focus immediately on earning when they start. WRONG!

Earning consistently in the stock market requires a lot of things and one of which is knowing what kind of investor or trader are you.

It is important to identify your trader identity because it will determine what kind of strategy you will draft and use.

Long term strategies won’t work for short term traders while short term strategies won’t work for investors.

3.) START SMALL AND FOCUS ON LEARNING.

A fact, all investors (including the experienced ones) experience losses and for a newbie, such losses can be emotionally damaging.

Starting small would lead to small losses while on the contrary, starting big would lead to big losses.

A 10% loss of P10,000 is far less than a 10% loss of P100,000.

Gains will follow once you understand the market well, having the right strategy and sticking (no matter what) to your plan.

You’ll never earn consistently unless you learn the ropes.

4.) STOCK MARKET TRADING IS NEVER ALL ABOUT PREDICTING LOWS AND HIGHS.

On thing that makes the stock market exciting is its unpredictability.

Nobody nor any system can predict what will the market do.

People often misunderstand the “buy low, sell high” concept.

They think that its knowing exactly the low or the bottom and the high. Investing is all about demand and supply rather than predicting the lows and the highs.

A good background in economics and statistics (as well as psychology) will be a big help for your stock market investing venture.

5.) LEARN TECHNICAL AND FUNDAMENTAL ANALYSIS.

Technical and fundamental analysis are two of the most popular analysis methods used in stock market investing.

Fundamental analysis generally covers the economics of a certain stock while technical analysis looks at the emotion of the investors.

In other words, fundamental analysis will make you pick the right stocks while technical analysis will make you pinpoint when to buy and when to sell.

6.) DON’T FORGET SENTIMENT. 

Sentiment is simply the overall emotions of the market.

Keep in mind that stock prices move up and down because of the mood of the market.

If majority is buying, stock prices go up and if majority is selling, stock prices go down.

By simply understanding the power of sentiment and applying it well, it will lead to very consistent and enormous gains.

7.) SIMPLICITY IS BEAUTY.

Too much analysis would lead to paralysis hence while still new to the market, make it a habit to make your analysis simple as possible.

Think of this, if your analysis is too complicated, what are the odds that other investors and traders see what you saw?

If its simple, they would probably see what you saw and would make the same decision that you’d make (and there goes your demand).

 

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