Every beginner trader needs that bit of guidance or else it will be easy to get lost in the stock industry. At the same time, it doesn’t have to be as overwhelming as it seems. If you believe the stock market is mostly about getting that lucky break to get rich quick, then you probably don’t belong in the stock market. A little bit of luck never hurt anyone, but getting the acceptable results you want is based on a lot of knowledge plus certain principles that are important to know and follow.
Even master traders follow principles that they’ve learnt over the years from trading. As a matter of fact, most of them are always still learning how to make the right decision at the right time.
To start trading, you first need to know some basics, which we’ll give you now.
Laydown foundations:
Sure, you want to get right into it and start investing and choose the hot stock, but that’s not the way to go about it, so ask yourself a couple of questions before you start. First, how comfortable are you with losing money? Obviously, no one wants or likes to lose money, but you have to identify your risk tolerance. Secondly, do you want a hands-on or hands-off approach to investing? A lot of people just want the investment they put to make money on their behalf without getting involved. Others enter stocks to learn more and get heavily involved. They want to learn how to read financial statements, understand the charts, pick the stocks and be informed.
Choose the industry:
It’s not easy to pick the winning individual stock out of thousands of company stocks. So first start with choosing the industry that is likely to outperform. This is known as top-down investing where you’re looking at the bigger picture. It narrows down your choice to two or three stock companies within an industry that are most favored to lead the way.
Check the cash flow of the company:
Don’t pay that much attention to what a company says about itself since there could be exaggerating about how well they’re doing, especially if it’s a new company. Cash flows don’t lie so understand how well the cash flow has been going for the company over the past few years. On the other side of the coin, a new emerging company might be doing very well. This means keeping an eye out to know the best stocks to buy now, which you’d want to check on a daily basis. You don't want to put your hard-earned buck into a raw investment-so staying up to date with the trends will be key.
Distribute investments:
As a beginner, you might want to distribute your investments in different stocks. This will minimize losses but won’t maximize gains.
Start early
Money needs time to grow. The earlier you start investing, the more time your invested money will have time to grow and compound. Plus taking a blow in losses can be tolerated when you’re still young, unlike someone older. It’s important not to be afraid of the market. We’ve all heard nothing short of horror stories of people losing all their money. Though some crises cannot be avoided, the stock market is the place to invest and make money.