10 Tips to Become a Successful Stock Trader
– Momentum Public Relations – By Stephanie Boucher
There are many advantages to knowing the ways of the market and successfully investing your money, with the most obvious being that you will make a fair profit. Investing in the stock markets often allows for residual income or maybe even a little bit of extra money for retirement, if done successfully, of course.
But successful trading is no easy feat, and it can be very overwhelming at first. “How much money should you invest?” and “What should you invest in?” are very common questions, among many others you will certainly ask yourself during the process.
Whatever your reason to start investing, you will find a few tips on how to smartly and successfully invest your money in the stock markets here.
1. Leave emotions out if the equation
A successful trader treats his investments like business deals. Decisions are always carefully calculated and based on numbers and facts – not on emotions. Greed and fear can be especially powerful when investing, and can get the best of anyone in a stressful situation, so best to keep your decision making neutral. Successful investors are always emotionally stable.
2. Identify your trading style
Give plenty of thought on the kind of investor your are – identify your goals, your comfort level with risk, your current financial situation and obligations, etc. This assessment will help you determine the kinds of stocks that are right for you. Also, if you choose to work with a broker or portfolio manager, be sure to choose someone who fits your trading style as well.
3. Do your research, follow the trends
Trade stocks based on numbers and analysis, rather than on gut feelings and what friends or colleagues might be saying. Rather, look at what top businessmen and investors are doing. Never invest on whim – a well-informed trade can go a long way in terms of profit. Analyze the markets to know when the best time of the day or month is best to make a trade.
4. Have a plan
Just like you should do your own research and determine your style, you should also establish a concrete trading plan. This plan should include your goals, your position, a stop loss point, a profit taking level, and a sound money management strategy. Lay out your goals and how you plan to get there on paper and thick to them, no matter what.
5. Know when to cut a loss
People seem to focus on when to buy a certain stock, but it’s just as important to know when to sell. Remember, an investment only turns into real money when you cash out. Never hold on to bad stocks for too long, thinking the price will eventually go up. Determine your stop loss point and if the stock falls below that point, it’s time to sell.
6. If you can’t afford to risk it, don’t!
Saving to fund a trading account can be a long process and a good trader should only use cash that is truly expendable in the stock market. The money in a trading account should never be allocated to anything else in your budget, such as paying off a mortgage or tuition. A successful trader should always be prepared to lose all of the money allocated to a trading account. This loss is never easy, but just think of how awful it would be if it should have been your next mortgage payment!
7. Keep a trading log
When you make a trade, get into the habit to noting why you made that decision. Write down your successful trades and mistakes you may have made along the way. This may seem tedious at first, but over time, you will be able to analyze this data, learn from your mistakes and become an even more successful trader.
8. Keep trading in perspective
There are always gains and there are always losses in trading. A good trader shouldn’t be surprised if a certain stock fails to meet expectations, just as a winning trade is only one step on the long road to profit – it’s the nature of the business of trading. Keep long-term, realistic goals in mind and always refer back to the trading plan. Once a trader can accept that these losses and gains are part of the process, it will really be much easier to stay unemotional when making a trade.
9. Use technology to your advantage
Trading is a competitive business, and there are technological tools that can help any trader stay on point. Charting platforms allow for an in depth analysis of the markets as well as allow to look back at historical data and trends. You can also use notifications on your smartphones the get instant updates and monitor trades from virtually anywhere in the world.
10. Be disciplined
A successful stock trader should always be disciplined and follow the rules he laid out for himself in his trading plan. Stick to the stop loss point as well as a profit taking level. Successful trading takes time and patience and those who are able to stick to their plans usually see more favourable outcomes. If you are unable to stick to the rules you have established you may need a new trading plan, or you should consider handing your portfolio over to a manager, who will stick to your rules for you.