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7 Important Things to Know Before You Start Trading Stocks

by Editorial Staff
September 29, 2022
in Business
Reading Time: 3 mins read

There’s more hype around trading stocks right now than for a long time, and that means a flood of new investors are getting their first taste of what the market has to offer.

If you’re a wannabe trader, paying attention to the following pieces of advice is important so that you don’t get tripped up by often-overlooked obstacles to a positive investment experience.

Table of Contents
Nothing is guaranteed
Having a goal is helpful
Research is vital
Automated investing may be the best option if you’re not yet confident about stock trading
Time is money
Testing your abilities is important
Knowing when to get out is crucial

Nothing is guaranteed

Overconfidence is the curse of rookie investors who believe they’ve found the perfect opportunity, and are certain that they’ll see significant returns.

The reality is that in the stock market, there’s no such thing as a certainty, and even the most stable assets can fall from grace in a flash.

That’s why you should never invest more than you can afford to lose, and always aim to build a diverse portfolio so that you aren’t exposed to as much risk.

Having a goal is helpful

Whether you’re looking to make a living from trading, planning for retirement, or building a nest egg to fund a major purchase, it helps to know why you’re trading stocks.

With a specific target in mind, you’ll be savvier with your money, and less likely to lose track of the purpose of trading beyond the thrill of making gains.

Research is vital

Using reputable sources of finance news to stay on top of the markets is essential if you want to take your investments seriously, and be in control of your destiny.

The worst mistake you can make is to invest in a company that you don’t understand. Without knowledge of the firm or the industry it operates in, you can’t judge if the current price represents good value.

Automated investing may be the best option if you’re not yet confident about stock trading

Platforms which offer automated stock trading online are a great choice for amateur investors who are intimidated by the thought of making decisions about where to put their money.

The latest investment solutions are able to harness the power of machine learning algorithms to make trades based on millions of data points, so you can just sit back and let software do all of the hard work for you.

That’s not to say that you need to leave everything up to an automated investment platform. With time you’ll become more capable as a trader, and you can gradually lessen your reliance on this beginner’s crutch.

Time is money

If you don’t have enough time to commit to staying on top of the markets, then it doesn’t make sense to get into short term trading of stocks.

Instead, you’ll be better off choosing low risk assets that pay dividends over the long term, and have the best chance of increasing in value if you buy and hold for years.

Testing your abilities is important

One important perk of modern trading platforms is that many will let you get a taste for what it’s like to buy and sell stocks with a view to earning a profit without risking real cash.

Having a practice account that lets you learn the basics, and make mistakes without paying for it, is better than going all-in immediately with your hard-earned money.

Knowing when to get out is crucial

All good traders need an exit strategy, as no stock will go up indefinitely, and there’s a point at which holding an asset becomes illogical, even if performance has been stellar up to that point.

The old adage of buy low, sell high still rings true, and selling is hard to do the first few times you let go of a profitable stock.

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