Stock trading is a fast-paced, often risky business. While stock traders pride themselves on finding undervalued assets and earning significant profits from them, they also have to be mindful of their risk tolerance levels. Many new traders make mistakes that can lead to an unsuccessful start or, even worse, significant losses.
Starting by trading on markets with clear trends can help new traders experience early successes to build up some confidence before trying to trade on less stable markets. It’s also vital for new traders to diversify their portfolios; this doesn’t mean getting involved in every single type of market but rather understanding the different kinds of trades one can make.
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Two vital tips for the new generation of traders
Stock market trading has become one of the favourite money-making opportunities for millennials. The current state of the economy, its uncertain future and instability in job markets make it more critical than ever before to secure your financial future by means other than primary saving and fixed deposits. Stock market trading is a great way to do that because it requires no initial capital and offers a lot of opportunity for making high returns on small investments (relative to traditional savings options).
So much so that stock market trading has become one of the favourites among many millennials looking for exciting investment ideas. According to Nasdaq’s article “Why Millennials Are Ditching Retirement Funds For Cryptocurrencies”, 35% of Gen-Z’s have already invested in cryptocurrencies, even though the market cap remains only a fraction of stocks.
That being said, not everyone can be an expert trader. The high volatility associated with trading makes it very risky for novices to invest their savings into individual stocks without due training or guidance. This is why there are so many online platforms offering free stock market courses for beginners looking to learn how the stock market works and get involved in trading investments. Open-source learning platforms like Udemy offer thousands of options when you type in “stock market” or “stock trading” in the search bar. However, most free online courses don’t go much beyond explaining what a stock is and outlining general terminology used by traders. This is why we’ve decided to write a list of the “do’s and don’ts” for people looking to invest their savings in stocks.
DO: Start Small and Learn Slowly –
The allure of online investment courses is that they promise high returns on small investments. While this may be true, it isn’t prudent to enter the stock market with your entire life savings or try trading on a large scale before you clearly understand how the whole process works. Try finding a good beginner course online and start from there. It will cost nothing but time, but when you finally get started, make sure not to follow the “everything at once approach”. Instead, take your time, practise on paper before you trade with money, and only invest your savings once you have a firm understanding of what you are doing.
DO: Learn the Lingo –
The stock market isn’t like any other market where you can go and trade goods or services for money. To put it in its simplest form, the prices of stocks tend to move up or down depending on how much demand there is for each company’s products and services (supply and demand). This means that before you enter the stock market, you need to understand how supply and demand affect individual stock prices. Otherwise, all investment decisions will be purely speculative, with no idea if they were made based on local economic conditions or not. For this reason, we recommend
In conclusion
A common mistake among new stock traders is focusing too much on short-term gains. This can lead to rash, unwise decisions that aren’t well thought out, resulting in heavy losses or missed opportunities. Good self-discipline is essential for any trader, especially new ones since this career choice requires strategic thinking, discipline, and patience to succeed.
