When your business first starts to trade on the stock-market (or any other market for that matter), it’s going to face a steep learning curve. For starters you may not be aware but ‘trading’ stocks is very different from ‘investing’ in stocks – so you need to be absolutely clear about which one you intend to do for your business.
Simply put, ‘investing’ in stocks means that you’re in it for the long term gains. As such you buy stock in a company, and hold onto it for the returns that it will bring. On the other hand ‘trading’ stocks is normally used to describe active trading – where you buy stocks but hold onto them for a very short period until the price increases and then sell them and collect your profits.
Once you’ve cleared that up, if you’re still intend on successfully trading stocks and making a profit from it – the four key tips that will help you out are:
1. Always have a plan and stick to it
When you buy a stock you should always already have a plan in place. That plan should consist of the reason you feel that stock is going appreciate in the short-term and how much you feel it is going to appreciate by.
Despite the fact that trading is a short-term activity, ‘short’ can be relative. Some traders hold on to a position for less than a day, and others do so for a week or more. By planning out your trades (and then sticking to that plan), you’ll find that you’re much more likely to make a profit.
2. Set up a contingency if the plan doesn’t work out
Planning is nice, but sometimes things don’t go according to plan. At some point or other your prediction is bound to go pear-shaped and when that happens you need to have a contingency in place.
The most common contingency is to set up a stop-loss order so that if the price of your stock drops to a certain level, they will automatically be sold and you’ll cut your losses. Many newcomers often make the mistake of cancelling their stop loss orders and trying to stick things out – but that rarely ever turns out well.
3. Know everything to know about your market
In order to improve your ability to make accurate predictions about how the stock price is going to move, you need to know everything that there is to know about your market. That can be tough, and it really is a full-time job.
At any given time you should know the various factors that could affect the price of the stocks. Also you should have one eye on events that could cause the stock price to move in one direction or another, and figure out how likely it is to move in either direction.
All of that requires that you stay up to date with what’s going on, as the price can vary often move at the drop of a hat.
4. Learn about risk management
While there are many skills that you need to pick up to improve your stock one of the most important is definitely risk management. As you start to about how to measure the risk vs. reward ratio and manage your risk with your capital, you’ll be able to make better decisions about how and when you choose to trade.
If you can cover these four areas, your trading career will be off to a great start. Make no mistake there’s still a bit of a learning curve that you will need to tackle, but at very least you now know what you’re getting into and what needs to be done to emerge on the other side.
Trading stocks is certainly not for the faint-hearted or for the unprepared. It is a unique challenging environment that tests even savvy traders, and so you’re definitely in for a ride. However if you’re willing to stick to it, learn the skills that you need to learn and study the market – you will be able to achieve the success that you’re after.
Think you’re up to the challenge? If so why not get started by heading over to www.etxcapital.co.uk and starting to make your very first trades. Whether you’re interested in trading equities or indices or other derivatives, you will find practically everything you need right there.