Is it a fantasy to make a full-time living just trading stocks? It is possible, but not probable. Theoretically, you can earn in a month what you earn at a regular job in a year, but it’s unlikely — unless you happen to be exceptionally good at stock trading.
Unfortunately, many people enter the stock market with a get-rich-quick mentality. While it is true that you can make a large sum of money quickly, it isn’t easy to do. You have to know what you’re doing to make the big money, and it takes time to be good. The reason people jump to the assumption that trading is easy is that many stock market courses are marketed to create that impression. Additionally, there is no shortage of success stories of ordinary people who have become proficient in trading and have made a good living from it.
In order to trade for a living, you need to have an extraordinary level of dedication to understanding the stock market. You need to know how the stock market works, discover trustworthy trading methodologies, and understand risk-management and market volatility. You also need to know practical things, like the different security markets, market opening and closing times, and stock market holidays. In short, you must be thoroughly familiar with the world of stock market investing.
Let’s take a closer look at some of the things you can do to begin stock investing.
A 7-Step Roadmap
In order to start stock trading, you must devote yourself to learning. While there are many books and courses in stock trading, it's easy to get lost in the details. Here, then, is a 7-step roadmap on some of the things you need to know before you start trading stocks:
1. The basics. Understand what the stock market is and how it works. Focus on getting a big picture perspective.
2. The terminology. Every subject has its own language. This makes perfect sense to those who are part of the discipline but a complete mystery to others. The stock market has its specialized language that you must learn to speak to get the most value from your studies.
3. The business. Understand how people create a home-based business from stock trading or invest for their future from stock trading.
4. Researching. Learn how to find stocks, evaluate risk, and decide if there is a profit potential. You need to develop a process for researching the most promising stocks to buy. Most people tend to rely on stock tips, read the news, or follow some guru’s recommendations. Most novice traders who follow this path of least resistance end up losing money. You must learn to find good stocks on your own without relying on the expertise of others. This is not to say that the experts are always wrong, but that you have to learn how to think for yourself.
5. Tools of the trade. Every industry has its specialized tools, and stock trading is no different. Trading toolkits include stock scanning software, stock charts, candlestick charts, stock indicators, and risk-analysis calculators. Learn how to use each of these tools well.
6. Place an online broker order. After you’ve chosen your best stocks, based on risk evaluation and price, you are ready to buy your stock. If you need help funding that initial purchase, you can work a few odd jobs to build up your bankroll. You must now learn how to choose brokers and enter a buy order for the stock you’re interested in.
7. Protect profits. You must learn how to use stop orders to protect your profits should the market suddenly change direction.
In order to start out right with trading, you need to take a few classes that teach you these 7 major things and then practice a lot of paper trading.
In closing, some other important things to know before you invest are your own personality, how to manage your money well, and how to reduce risk by diversifying. If you’re not aware of your personality strengths and weaknesses, then you won’t know how to play to your strengths and avoid your weaknesses. If you don’t know how to manage the money you now have, then you won’t know how to manage large sums of money well, either. And if you don’t know how to manage risk, then you’ll either err toward over caution or excessive risk-taking.
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