Stock Market for Beginners
If you are just starting out, there are many things that you need to learn about the stock market before you start trading. You need to be fully aware that stock market is not for everyone and you shouldn't be investing or trading if you don't have indiscipline or money. You should be trading only with the money that you can afford to lose. There is always risks in trading stock and it is possible to lose all the money that you invested in.
The 20-80% rule applies to the stock market meaning only 20% of the people who trade stocks will make money while the other 80% loses money. If you want to be in the 20% group, you better learn how the stock market works and spend some time paper trading before you trade with real money. The losers generally listen to stock tips or speculate and never have a clue about the stock market. They just buy and sell because they think they need to and they never analyze why they are losing. You want to stay away from this group and learn your way up to trade successfully.
Greed and Fear
The two biggest enemies of trading is greed and fear. When a trader gets greedy, he tends to hold on to his stock for too long and never sell his profitable stock until the stock reverse and wipe out all his profit. On the other hand, a fear trader is never able to enter a trade because he afraid that he may lose or the price he pays for a stock is too high, so he kept waiting and waiting until the stock explodes. If you trade with fear or greed, you will lose money no matter how you trade.
Fear makes you act stupidly and make bad mistakes in the stock market. For example, the market was down over 140 points this morning and if I sold my stocks at the open, I would have been down 3%. This is exactly what I would do years ago when I first started trading. I always sell at the worst time and lost money. Why was it a bad time to sell this morning? There are a few reasons
1. The market is usually direction less in the morning where the market is open by the inexperience traders.
2. When was the last time that Dow down over 200 points? -> long time ago
How often is Dow down over 200 points? -> not very often
- So since Dow was already down 140 points, the worst it can go is go down another 60 points and make it 200 points, but the probability is against that. There is a good chance that the Dow will recover later in the day and go up which gives you a better chance to sell if you do decide to sell.
How to overcome fear?
Stock market beginners usually have a hard time overcome their fear and resist to sell their stocks at the wrong time. There are a few ways how you can overcome this fear.
1. Trade with smaller money – trade only with the money that you can afford to lose. If your budget is $10,000, trade only $5,000.
2. Trade with a plan and follow it – do your research every night and follow your plan the next day. No matter how the market opens the next day, you already have a plan on how you would react.
3. Do not login to your broker account – if you trade with an online stock broker, do not login to check your balance during intraday. Many traders will get upset and dying to get out of the market when they see their account is all red.
How to overcome greed?
Greed is another thing you should avoid and here are some tips.
1. Set a profit target and stop loss for each trade you enter - As soon as you hit the profit target, you sell it and never look back. Often times, the stock might keep going higher and if you start to regret, then you start to make mistakes. Remember, it is hard to buy at the lowest price and sell at the highest price. Your goal is to buy low and sell higher regardless of the profit. When you gain more experience and become more displine, then you can let the profit run.
2. Focus on trading better - You should always focus on trading better instead of trading for maximum profit because when you trade better, money comes automatically. On the other hand, if you always try to make the maximum profit, you will not be able to stay calm and make the best decisions.
Technical Analysis for Beginners
You should learn technical analysis because it is the key to trading success. Technical analysis is a way for traders to predict the stock price in the short term. You want to buy a stock at a good time and sell it at the right time when your technical indicator tells you so. Traders on Wall Street uses technical analysis to make profit in the stock market. You can get the technical analysis book to learn about how technical analysis work and how traders use it to make money trading stock.
Trading Course for Stock Market Beginners
If you are serious about trading stock or options, I highly recommend that you get The Winning Trade System. The winning trade system is a video course consists of 16 modules that teaches you how to trade options.