Stock trading is not for the faint of heart or for the uninitiated. It is a dangerous, and sometimes rewarding, profession that leaves many smart people with empty pockets and broken spirits.
Are you scared yet? I hope that you are a little scared. It is not easy to learn how to trade. It is a skill that takes lots of preparation, research, and time if you want to do it correctly.
Too often, I hear people tell me that they have traded online and that they have no idea what they are really doing. They just chase the market and jump onto the next big thing. That line of thinking will leave you broke.
Before I started trading I had to learn how to trade. I hoped that I could gain trading experience without losing my shirt in the process. I spent over a year watching and practicing with "paper money" before I put my real cash into any trades.
If you want to learn how to trade, first you should take the time to study, study, study. If you do not have the time or the desire to invest into learning to trade properly then you invest at your own risk. Experienced traders will see you coming from a mile away and will drain all the money from your pockets and put it into theirs.
Here are some tips that may help you to survive:
- Never chase after a big score. A steady approach with many small victories will add up over time and make you successful. This is not a get-rich-quick plan.
- Never put more that 10% into any one trade. This will keep you from having all your eggs in one basket.
- Learn the basics of technical analysis. This is essential to learn. You must know the best times to enter and exit trades to minimize your risk.
- Always have an exit strategy before you enter any trade. Don't get caught without a plan.
- Don't chase the market. If a trade gets away from you, then let it go. There will be plenty more in the future. If you chase trades you tend to buy high and sell low. This is the opposite of what you will learn as a trader.
- Understand the basics of fundamental analysis. Know when major announcements will be made and how they may affect the price per share of your active trades.
Overall, be informed. Learn as much as you can about trading or someone like me may take you to the cleaners.