A year ago, I decided to try short-term trading in the stock market. As of today, I have already gained some and lost some (or more, hehe). If you offset those two, I am not yet where I wanted to be. That’s for sure! But, I’m not in a hurry. I know I have to be patient while learning the whole circuit. My long-term goal is to compensate through stock trading my daytime job salary net of tax. If there’s one thing I’m happy to know, it’d be that it is very possible. I just need to learn more to keep up and do better each day. So far, I am loving the journey and all the learning. I may have had difficulty making time for it but this is one thing I’ve never lost my passion for. Here I am again, immortalizing my first lessons in stock trading, as a novice.
1. Never follow the prices because following the market prices means following blindly. The environment affects the prices. They are not the cause of the movements in the market, rather, they are the effects of various factors combined. So, following where the prices go would eventually get you lost. Have you ever found a stock with price getting higher and suddenly dropped as soon as you bought them? It’s because you based your decision on its price. You followed the price. This is one of my most stupid mistakes, ever. Well, not really stupid if you are a beginner but I’m telling you now so that you won’t fall for it just like I or we did! I bought X stock because I noticed that its price is getting higher and higher WITHOUT even checking its chart. Next thing I know, it was heading the downhill. Every buy point and sell point should be supported by a diligent fundamental and/or technical analysis.
2. It’s easier to enter than to exit. If you think it’s hard to set-up a point of entry (buying price), wait until you get in in an uptrending stock only to be clueless when to get out, to either realize a good profit or wait until the peak of the uptrend. My own definition of good profit is a gain which is good enough to compensate the time you’ve waited or for the time your money was tied into that certain stock net of all other charges like taxes and commissions. Wise words I received for this dilemma is this, it’s better to regret than repent. (Mas okay manghinayang (na mas tumaas pa ang presyo) keysa magsisi (at madali pati puhunan.) The first time I perfected how to set an entry to X stock, I did not know how long to ride with the uptrend. I think I became both greedy and aggressive that time and mistakenly thought the chart was showing a healthy pullback rather than a reversal and start of a downtrend.
3. Study the market. Learn how to spot the soon-to-boom stocks. How? News and charts. Spend time with business news and charts. If you have more juice to beat, read their financials and prospectus. No other easy way. Also, expand your knowledge, whether in a technical or non-chart analysis. Join forums, listen to free webinars, subscribe to groups, enroll in lessons with a fee, buy books, anything you want and can afford, both money-wise and time-wise. These will all help you familiarize yourself with the market and broaden your skills and knowledge at the same time. I know it’s not easy as I myself is still struggling every day to choose charts and business news over Facebook. Hehe. But make it a habit, say, every morning, like during or after breakfast or while in-transit heading to your office. When it’s part of a routine, it becomes so much natural and when it’s natural, it becomes easier no-sweat stuff.
4. Set-up a good capital. By good, I mean a considerable percentage of your total savings. For instance, 20 to 30%. Actually, it has a formula wherein your age is a factor. The older you are, the more you should invest in riskier funds as a sign of gearing up for retirement and also assummimg you already have emergency funds and insurances. Aside from skills and knowledge, you will also need capital should you decide to be serious about stock trading. You see, small capital yields small returns. If you want bigger returns, you need to invest bigger amounts too. Now, you do not have to beef-up your portfolio in a one-time-big-time way if you can’t afford it. But, if you have so many idle money you’re willing to invest in the stock market, then, why not? But, if you are like me who just allot a certain portion of our savings to the stocks, for a balanced and diversified personal financial portfolio, then it’s okay to invest small amounts consistently or regularly into your stock account. Besides, it’ll be wise and prudent to invest huge money in the stock market once you’re confident enough with your decision-making. And, when is that? When you can convincingly answer why you buy X stock for such price and why you sell X stock for such price.
5. Apart from capital, it would also be nice to have a reliable gadget and internet connection. Some smartphones and tablets do not display charts. A notebook or laptop is still the best. I also suggest that you create two separate accounts for your long-term stock investment and short-term trading. Also, do not forget to keep a diary or records of your stock transactions. That way, you’ll have a record of lessons derived straight from your own experience. You will be able to monitor how you are faring in the world of stock market. Plus, it’ll give you patterns of some stocks. Before you know it, you’ll have your favorite stocks!
Are you into stock trading too? If yes, are you a novice, amateur or expert? Who are your trusted brokers? Any lessons you care to share with us? Me and my readers. If not, do you like to try trading in the stock market too? What do you think of my journey? What do you think of my goal? I know someone who made her first million through the stock market while in her pajamas! Cool! I’m envious! I’m zealous too to read your thoughts! So, type away in the comments below.
Have a great week!