Tips to Help Increase Your Chance of Success
Most stock traders fail and this will always be the case. New traders are lured into trading believing being successful is easy and they are going to make a lot of money in a very short space of time. Unfortunately, this is a very long way from the reality.
If we learn the basics of stock trading and practice on a demo trading account before funding a brokerage account we can greatly increase our chances of earning money.
Some topics to learn about include:
Fully understand the risks – I know it sounds like common sense, but so many new traders go into stock trading without fully understanding how much money they can lose. You've probably heard the statement “Investment value can go down as well as up”. This is very true, perhaps a better one would be “Trading stocks can result is massive losses if you don't know what you are doing”.
Trading plan and discipline – Learn to create trading plan and practice improving your discipline so you can stick to your plan. A badly disciplined trader is nearly always a losing trader.
Learn about technical and fundamental analysis – Technical analysis is where the trader uses past prices to try to predict where the market will head next. Fundamental analysis is where the trader looks at financial statements and attempts to gauge a company's financial health and future potential for growth.
Understand what all the different terms mean – If I asked you to define a small cap stock would you know how to? How about an Initial public offering or IPO?
What about a broker – Do you know the difference between discount brokers and full service brokers? Discount brokers typically have much lower trading commissions and can reduce your expenses. However, they don't offer the additional services full service brokers offer like trading advice, tax advice and retiring planning.
Peter Marsden
http://www.learntotradestocks.org
