Trading stocks can be an excellent part-time or full-time career for any individual with a passion for trading. There are specific trading fundamentals that you should not miss as you begin your trading journey. The following five tips should help any newbie stock trader survive in the long run.
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1. Be Selective When Picking Stocks
There are hundreds of stocks in the market, but it doesn’t mean you should trade all. Research these stocks to determine the benefits and risks involved in trading certain stocks. Also, you may consult professionals to get a glimpse of the stocks they trade and why.
Pick a handful of stocks and learn their behavior to help you develop a strategy unique to each stock. Avoid using another trader’s approach. You may modify their trading strategy to fit your approach.
2. Control Your Risk Appetite
A common problem among most newbie traders is the urge to make quick money. There is nothing with wanting to make quick returns, but it’s not the reality in stock trading. You will have to work to manage to get stable returns.
Also, control your greed as it could lead you to take uncalculated risks. If you open a large position, it will limit your ability to think straight when things don’t go as expected. In many cases, new traders will move their stop losses only to be wiped out by the market.
3. Involve Indicators
You might have been discouraged from using indicators on claims that they are slow and unreliable. There is nothing wrong with using indicators if you understand how they work. In most cases, indicators will keep you from rushing into a trade and may advise you on the best areas to place a stop loss.
You may use default or custom indicators to analyze a market. Customer indicators like the free NinjaTrader indicators can be excellent for new traders. They are easy to install and use, and with the right trading strategy, you can manage to stabilize your trading results.
4. Invest Enough Capital
Some beginner traders will deposit as low as $500 into their trading accounts and expect to make millions in profit. It would help if you understood that you would require reasonable capital to make reasonable profits. If you have enough savings, you could start with at least $10,000.
Don’t rush to make trading your full-time career. It would be best if you keep your day job. It will help you reduce your financial pressure. This way, you will be in the best mental state to make the correct trading decisions.
5. Don’t Trade Every Minute of Every Day
You might be familiar with the term “over trading.” It means entering and exiting trades almost every five minutes and, in many cases, without any solid reasons. Most people confuse overtrading with day trading. You can be a successful day trader that doesn’t overtrade.
Some great traders will only trade at specific times. They will be away from their trading desks when the timing or market conditions don’t fit their trading approach. Develop a trading strategy that allows you to look at your charts for not more than 30 minutes. You must have a reason for picking a specific trade and getting out of the trade.
6. Backtest Your Trading Strategy
Once you have developed a potential trading strategy, you might want to back-test it to understand its success rate. If it has at least a 50% success rate, it can be profitable in the long term.
7. Conduct a Self-Assessment
A self-assessment will help you understand your character and manage to develop a trading strategy that fits you. You might consider swing trading on higher time frames if you have mastered patience.
If you don’t want to keep overnight trades, you might need to develop a day trading approach. It should let you stay in the market for the shortest time and only during specific periods.
8. Start Small
When taking your first live trades, ensure you take small risks. The idea is to allow yourself to build confidence in your entries. Once you have mastered your strategy, you might expand your trade size, but don’t overdo it to ensure you trade the next day.