Trading in the stock exchange is not a simple matter. It can be very challenging and may require a lot of time, knowledge, skills, and patience. If you do not practice trading in a smart and strategic manner, you will surely end up losing more than what you have bargained for.
Here are some major things that you must do in order to improve your chances in successful stock trading. Let us discuss what these things are and how they can help you in smart trading.
Take A Stock Class, Get Educated
Stock and Option trading is one of those pursuits, that to be profitable takes some education and practice. Find a good class or mentor and learn the terminology, the indicators and temperament of the market. Although some successful traders will tell you that with time comes instinct when it comes to the feel of the stock market and trading, it’s tough to learn ‘feelings’ and ‘instinct’. If you are a beginner or novice trader, or perhaps a trader who has not experienced a lot of success, stick with classes or mentors that teach proven strategies that can be repeated and documented so you can keep a log of your successful and unsuccessful trades for learning and comparisons.
Start Trading Virtually Then Switch To Real Money That You Can Afford To Lose
If you have little or no stock/option trading skills, then trading can be quite a gamble. Your chances of earning are about equal to your chances of losing, it’s basically a crap shoot. Hone your trading skills and traverse the learning curve by trading virtually. This allows you to practice with no real money involved. Remember, there are a few things you are learning at once…the trading platform you are using (which buttons to push) and the stock system you’ve chosen to learn. You will make mistakes, don’t make them using real money. And once you do start to trade the market using real dollars, keep the amount low for starters, you are just getting started so you don’t need trading anxiety.
Because most trading markets can be unpredictable, make sure that you make use of money that you can afford to lose. It may be too risky to invest money that you will badly need for your daily living or for your future. Always take note of the risks involved and what you are particularly risking in the exchange.
Always Trade In Reasonable Sizes
Some markets in the exchange are able to allow individuals to trade very large amounts using leverage. And so, a lot of people trade in large quantities in order to assure larger profits. However, doing this may also open up the possibility of losing money in such large quantities as well. When it comes to the stock Market, always remember that stocks fall five times faster than they rise.
It is always wiser to scale your trades in order to lessen risks. Never trade sizes that can wipe you out of all your money. First take a small position and then if in a day or two the trade is running in the right direction add to your position. You reduce your risk in the trade by starting small, then growing your stock/option transactions from there.
Identify Market States
Before Trading It is also vital that you are aware of how the market is doing before you start trading. Take time to find out if trends are going up, down or sideways. A quick litmus test is to to look at the DJIA (Dow Jones Industrial Average). If you know whether the market trends are weak or strong then it may become easier for you to make the right decisions in your trading transactions…if you want to go Long, short or sit on the fence.
By getting a good picture of the market mood, you can easily lay down a plan for conducting a successful trade. Trends become easier to analyze when you have a sense of market direction. In this way, you may prevent making a lot of wrong choices and minimize any losses.
Set A Time Frame For Trading
If your main goal for trading in the market is to make a lot of money, planning beforehand when you would like to get out of the game can save you from a lot of risks. Managing risk is the difference between being a hundredaire and becoming a millionaire.
The stock market trading industry is consistently moving, and through the transition of time, prices evolve and fluctuate. The object of the game is to make money…take profit. Although it may be impossible to absolutely determine when you would exactly sell and take profit, it would be helpful if you at least place your trade in perspective and have an idea of when to sell. Selling and taking a profit before a stock has fully peaked is not a bad thing. You can always get back in if the indicators show it is still running in the right direction. Our motto is, “Never let a green trade turn red.”
Anyone who will lead you to believe that it is easy and it is always a sure thing to make money in stock trading is misleading you. Remember that the stock market, by nature, is a volatile and consistently moving industry. And so, you must be aware of the different trends as well as formulate a good and strong strategy to capitalize on the ups and downs of the market.
In order to make a successful trade, you must take into account the technical as well as fundamental factors in order to make good and informed decisions. Make sure that you use your knowledge and skills in determining a strategic plan to go about your trades. Achieving success in this industry is not as difficult as it may seem, but it does require discipline and consistency.