Stock trading for beginners or how to invest in stocks are the first two queries for newbie investors or traders. While right investment decision brings good fortune, bad investment destroys one future. Many people start stock trading with excitement and hope, but leave the investment world after losing their money and never try again in their lifetime. The article discusses how one can be get ready for stock trading and what factors are very important to be a successful investor or stock trader.
Stock trading for beginner is not a cup of tea, it’s a dog eats dog game or more pierce. Motivation is the key and first step for investing in stocks. Since most of the people give up the investment world after first shock from stock market investing, you must have a very strong motivation and passion to stay in investing business and be persistent because market will shock you again and again. Different people have different motivator factors. The Motivator could be you want to make a lot of money or you want to show other people that you can beat the market or you want to become a quick rich or anything else. Let’s say, you want to get motivation from a luxurious life you desire, you can start reading “TRADERS” Magazine and you will see how fabulous life this successful investor have, or you are motivated by money, you should look at hedge fund manager yearly income. You will see a lot of managers made more than a billion dollar each year or if you are motivated by legendary investor, you can watch this popular YouTube video “Warren Buffett How to Turn $40 into 5 Million. Here he described how $40 investment in Coca-Cola Company became $5 million and its value in today’s market is more than 10 million.
2.Read, listen and watch
Start to read some stock market classic books. This is helpful because reading classic will give you details of the the successful traders and investors, why they were successful and the lesson they learned from the market and what was their investment strategy. Some of the investment and stock trading classic books for beginners are The Intelligent Investor-Benjamin Graham (a favorite book of Warren Buffett), Reminiscences of a Stock Operator– Edwin Lefevre, how to make money in stock- William o’neil. Reading books will also help you to read charts when you will start real investment. You will also learn different types of chart patterns which is also known as technical analysis , which chart pattern is good for what time period, the difference between value stock and growth stock, price earnings ratio(P/E ), Earning per share (EPS) etc.
You can also start to watch TV shows about financial news and stock market. One very well-known TV show for stock market investing is Jim Cramer CNBC show “MAD MONEY”. This show will give you real time excitement about trading and latest update of your favorite stocks and opinion from expert. Here is you tube clip of mad money “Cramer: The Best Retail Stock In America | Mad Money | CNBC“. This clip Crammer is describing the best retail stock for 2015 with a funny way.
Failure is your friend
Failure is inevitable to stock market investing and embrace the failure as tuition of investing lesson. Key to be a successful investor in the long run is lesson you learned from your failure and use that lesson successfully latter in the stock market investing. Every investor gets the taste of failure in the capital market whether you are a legendary investor Warren buffet or a rookie stock trader. What differentiate a successful investor from a failed investor or beginner stock trader is a successful investor never gives up and use his failure as an opportunity to learn about stock trading and use that opportunity for the future investing. According to a statistics, only 10 percent traders or investors are successful. However, from my experience I can tell this number is below 5 percent or close to 1 percent. Early failure rate is not important at all. Many beginner traders make mistake using their beginning mistake in stock trading as an indicator of their success. Actual success comes from the how much you improve overtime, how much you learned from your mistake and how quickly you adept with market opportunity.
Learn from the market
Trading or investing is different than other professions and is very similar to entrepreneurship. No academic qualification can guarantee you making a successful investor. Law school makes you a successful lawyer, medical school makes you a doctor, but business school cannot guarantee you making you a successful investor. An investor is student all his life and market is the only teacher that helps you learn stock trading. Lesson you learned from the market helps you to understand the future behavior of the market. Technical analysis is based on the theory that market would repeat itself. This is not true all the time, but this is highly relevant small time frame. That’s why technical analysis is so popular to the short term traders or price action traders.
Only lesson you should use in the stock market trading that you learn from market, Never guess or make simulation of your projected outcome, most possibly you will lose most of your hard earned money. You can learn basics of investing from a stock trader or stock investor, but never try to replicate their method in your investing or stock trading method. One good example is that every hedge fund has to reveal or update its portfolio after every three month. Every investor can watch which legendary investors holding which stocks. I never saw any one become successful trader or investor following his legend trader or investor portfolio. Another point is do not try to buy trading software as Holy Grail for stock market investing and buy stocks based on that.
Follow some stocks that you know or like
At the beginning, no one knows what is a good stock and what is a bad stock or what makes a good investment and what makes a bad investment. Real estate Billionaire investor Donald Trump once said that sometimes no investment is the best investment. This is a hard truth. However, since you have to start from a point, my advice is pick some stocks that you know or you think these stocks are good for investing or stock trading. Start to follow your picked stocks and monitor the performance of the stock everyday at least 3 month against to any index (most popular index is S&P 500). If any stock performance is really bad, drop that one and pick new one for your portfolio and check how many stocks exceed the S&P 500 index performance and how many stocks under perform the S&P 500 index. You can also check your real time performance by opening a demo account that will show your real time profit and loss and your portfolio performance relative to stock market.
Make a journal of your investment
Every good trader becomes a great trader by learning from their mistake and using his learning as an opportunity for future trade. The best way to do this is mange a journal of your everyday stock trading activity and go through your mistake at least once a week. Jack D Schwager mentioned his famous book “Market Wizards: Interviews with Top Traders” that most market wizard (the most successful trader) kept the trading journal in their earlier days of trading and this was one of the prime reasons for their success in the market. One of the benefit to keep journal is to look back your mistake and observe the rate you are making the same mistake. Just follow this rule, you have a great probability to be a great trader or legendary investor. Risk is everything in investing. If you know where you are losing most of your money, odd will change in your favor if you stop doing the same mistake.
7.10000 hour rule
Investing is not a sprint, it’s a marathon. Do not expect to get results very quickly. Get ready for 10000 hour rule and spend at least 10000 hour to become a consistent trader. Actually you need more hour to be legendary trader, most of the billionaire traders or investors become billionaire when they are 50 or close to 50. That clearly shows that investing is a long run event, you have to build your asset step by step. If you see you are doing really well in the first 3 month without prior experience in trading, consider it you are just lucky or something is not right. This means this result is not an indicative of your future performance and you should not take this result seriously until you see same performance at least one year period. At the beginning do not try to judge your performance rather try to learn from your mistake and repeat that process every time you make the mistake. Best way to do this is manage a journal.
Subscribe to financial newspaper or finance blog
This is a modern approach how to learn about investing. You can subscribe to finance blog or newspaper that you like and you will get update of the investment news about what stock you should buy(buying stocks), what stock you should sell(selling stocks) and what stock you should hold. Some investing and trading blogs have special section for newbie traders like investment 101, investment basic, how to invest in stock market, newbie’s chart pattern or Stock trading for beginners 101. Read this section carefully which one you think authentic and helpful.
Sometimes you will get details update of the stock and top picks of the blogger or newspaper and why they are top pick. Some websites provide free buy, hold and sell rating of the stocks. For example, Zacks Investment Research provides you a free checkup of picked stocks whether they are buy or sell or hold. Some website also provide free chart analysis of the stocks. These are all useful to pick up the right stock. Investor business daily (IBD) is another great resource to learn about investment. At the beginning IBD top listed stock at least help you buy some stocks when you do not know anything about stock trading or investing. Another good thing is that their investment approach follow both fundamental and technical analysis and have a section for stock trading for beginners. Some other good website is Seeking Alpha, Market watch, zero hedge, Motley Fool, the street.
Programming is not essential for investing. However, if you want to be a trader, programming experience will definitely give you edge over other people. Especially you can back test your idea easily without depending on any developer. You can start with any program you like. However, now day’s python is highly popular programming language. This language has some features that make it highly popular. First, this language is very easy to learn. Second, if you use ipython, you can handle programming like excel. This is very convenient. Third, python is the best language for algorithm and machine learning. Finally, back testing is very easy on this program because of its panda package. C,C++ is best for you if you want to be a high Frequency trader (HFT) and low latency or speed is your main concern. Either way programming is an important arsenal in your toolbox if you want to be a successful stock trader or forex trader or derivative trader.
Join a stock trading for beginners meet up group
Joining a meet up group is definitely a great help for any aspiring trader. If you are a student, joining your college investment club is the best idea. You will get same minded folks over there. However, if you are not in the college, you can search your local area meet up group for stock trading for beginners , stock market investing, how to invest in stock market or investing group . Key to success from joining a meet up group is join a group that will give you maximum benefit. Let’s say, you are a novice investor, but joined a meet up group with professional investors. This group will not help you either or will be little help for you to achieve your goal. One way to select the right group is first see the topics of the forum and member profiles. Joining in a group also helps you to share your ideas and most importantly you get a lot of ideas without paying for that. Joining a group may also be a possible place to get your future investment or stock trading partner.