Making a profit in stock trading can often be quite a challenge even for seasoned traders, so it’s no surprise newbies have to be even more cautious of how they operate in the stock trading market. While trading effectively is a skill you develop over time, there are a few trading tips you should employ in your first days as a trader.
1 – Do your research
No trader enters the stock market on a whim and proceeds to buy any stock he fancies (well, no serious trader at least). Everyone does their homework before the market opens for the day, and if you want to be able to survive in this environment AND make a profit, you need to do your research.
Be up to date on the latest stock market news and events that affect stocks—the Fed’s interest rate plans, the economic outlook, etc., or you’ll watch all your funds drain right before your eyes.
2 – Budget your trades wisely
You probably won’t have a lot to start with, and that’s ok. Most people don’t. What’s important, though, is making sure what little you have isn’t used up in the first month or so. Always invest only a small percentage (even 0.5% is quite good) of your funds into the day’s proceedings; your returns will be slower, but you’ll be risking a lot less money too.
3 – Keep calm and stick to a plan
The stock market always has ups and downs, and these events can sometimes invite you to pool greater funds into a stock or pull out completely. NEVER jump at these anomalies in the trends since you are as yet quite inexperienced to know what they mean. Stick to your strategy and ride the wave out; more often than not, these anomalies are just red-herrings and not worth relying on.
4 – Things to avoid
Avoid penny stocks at all costs. These stocks come at a low price and advertise high returns, but statistically only rarely pay off. Anyone who’s seen the Wolf of Wall Street knows how much of a bad idea they are.
5 – Timing is key
As a newbie, you’re going to have to work harder than others in the market to find the perfect time to seal a trade to make the most of price volatility. That entails keeping an eye on the market constantly to identify trends and changes in the market. That also means you’ll have to set aside quite some time for trading daily, so be sure to get into trading only if you can spare the time to do so.