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Finances & Money

Stock Trading Smarts: How to Stop Dreaming and Start Making Money Now

Stock Trading Smarts

“Interesting, but overwhelming” is a good way to characterize the average person’s perspective toward the stock market. They’re tantalized by the possibility of making significant amounts of money from a computer just through a combination of research and insight, but they feel like it’s just too confusing of a world to step into and too time-consuming to learn the ropes.

The big mistake that keeps most people from ever even dipping their toes into the market is a belief that you have to understand every aspect of it right from the beginning before you can successfully invest. The trick is to instead focus on small, modest goals at the beginning and just learn what you need to know to reach them. If you find that you have a taste for investing, you can branch out and expand your knowledge over time, and you’ll be surprised at how easily it all comes to you if you take it in small bites.

There are four basic steps to getting started with no prior knowledge: identify your initial goal, do some studying, get in some virtual practice, and then jump into the actual world of investing. Let’s take a look at each in more detail.

IDENTIFYING YOUR FIRST STOCK TRADING GOAL

First, what about investing most interests you? Are you trying to establish a long-term fund for expenses later in life, such as retirement or college tuition? Or are you interested in shorter-term trading as a means of more immediate income? If you have multiple goals, the best way to prioritize is usually to establish emergency funds for the future first, then turn to handling any immediate high-interest debt before taking on longer-term goals.

Pick the item that’s the highest priority for you. The next step is going to be to do your homework on the smartest means of investing for that particular goal.

DOING YOUR HOMEWORK

No matter what goal you choose for yourself, many investors have been down this path already, and there’s a wealth of knowledge and experience out there for you to draw from. It comes in the following forms:

  • Books.
  • Articles.
  • Magazines.
  • Financial news sites.
  • Financial television programs.
  • Workshops / Classes.
  • Seminars

Passive reading is the best overall place to start, as in this format information is both abundant and free. You can get a wide variety of articles and financial news stories right in your browser daily; a good way of quickly sifting through all this information for the content that is most relevant to you is to set up an RSS feed and subscribe to the sites that are most interesting to you, filtering by the keywords related to your goals.

Books and magazines can also be freely had from your local public and university/community college libraries. You can also find quite a few free e-books online that are of value.

The major financial news sites include Bloomberg Business, CNBC, Reuters, CNN Money, Kiplinger and Google Finance. TV networks that deal entirely in financial and business news include Bloomberg Television, Fox Business Network, and CNBC. Additionally, just about all of the 24-hour news networks devote some time each day to investment-related programming.

The main purpose of this is to pare down all the information and approaches to your particular goal to ideally just one that makes the most sense to you and that you understand thoroughly. Map out your approach to purchasing stocks on paper in full to make sure you understand it. Once you do, it’s time to test it out.

VIRTUAL TRADING

Once you’ve got your investment strategy in place, it’s time to put it to the test in a consequence-free environment.

A number of websites allow you to invest in real stocks with pretend money. It’s as if you’re really investing, but none of your actual money is on the line. Some of the biggest sites that allow you to create a virtual portfolio for free include MarketWatch, Google Finance, Motley Fool, OptionsHouse, and TradeStation.

Of course, this experimentation is more valuable the more short-term your strategy is, as you can’t really simulate a long-term position. Even if you’re doing something like investing for retirement, however, it’s still helpful to go through the motions in a virtual environment first. You’ll feel more comfortable, waste less time and reduce the possibility of mistakes when you actually go to invest for real.

ACTUAL TRADING

Once you’re confident enough to begin investing for real, you can open an account with an online stock broker and get to it. There’s no one-size-fits-all answer for who the best broker is, it depends on your individual circumstances and goals. If this is your first time out, however, it’s probably best to stick with a discount broker that is a member of the Financial Industry Regulatory Authority (FINRA) as you learn the ropes. A full-service broker will help you out with advice, but the cost is considerably higher.

Millie Gould helps newbies who are just entering the world of stocks and shares to make as few mistakes as possible. She has been mentoring for just under a year and is enjoying sharing her knowledge with a range of individuals.

Photo: CafeCredit.com

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