6 Steps to Start Stock Trading Successfully
So, you want to start trading the stock market but where do you begin?
We all need to start somewhere, both from an educational standpoint and the actual ‘doing’ part. Unfortunately there are a myriad of choices and Monday Morning Quarterbacks willing to collect on the excited yet unsuspecting new trader. Back when I started in 1985 there was nothing. No books. No websites. No backyard experts. I did my charts by hand. I collected data from the newspaper each day. In many respects I was fortunate because the noise and the B.S. was infinitely lower.
Below are 6 steps to help you sift through the minefield of information and enable you to build a strong foundation that leads to confidence.
- If you’re new to this game try and avoid discretionary-style trading – the unknowns exacerbate the emotional roller-coaster. Instead, work toward a proven strategy, i.e. one that that can systemised, proven via testing to have a genuine profitable edge and one that can repeated into the future with ease.
- A strategy should be all-encompassing, meaning it should tell you when to enter, when to exit, how many shares to buy and importantly how many positions to build into your portfolio. In other words avoid those cheap tip sheets that promise XYZ Dog Stock will rise by 600% over the next 3-months. Apart from the opinion of the author there is usually little merit to them.
- Short term trading tends to attract new traders because of the action and promise of quick profits. It’s also reason why some 95% of new traders fail. Shorter term trading introduces additional hurdles, such as commission drag, slippage, higher levels of work load and stress. Usually the broker comes out the winner; they have zero risk and guaranteed income.
- The Eighth Wonder of the World is compounding which is attributed to a slow, deliberate and progressive accumulation of capital. Trading shorter term makes it increasingly difficult to manage larger sums of money, so if you’re truly serious about trading you need to start thinking about managing $200,000 or more sometime down the track. When trading longer term, many things work in your favour rather than against, one of which is allowing larger sums of money to be put to work.
- Your goal for the first year is to try and stay in the game and, if you’re lucky, finish the year in the black. Most people have an attention span of 3-months before changing strategies. There can be valid reasons for this, but usually it’s lack of patience. If you can stay with a strategy longer than a year, regardless of the outcome, then chances are you’ll be successful.
- Lastly, start slow and steady. Too often I see new traders go too hard, too fast. They want to trade this, that and everything in between. When the inevitable speed bump comes along they get bucked off their bike and change course. Stay with a single strategy for at least a year or until it becomes so automatic that you don’t think about it but just execute it.
Traders Tip: If you are looking for a strategy that ticks all these boxes choose our Growth Portfolio and trade alongside us.