There is a general misconception that trading is very complicated, leaving people (such as myself at one point) feeling overwhelmed when they want to learn how to trade.
You’ll be happy to know that this misconception is FALSE.
Learning how to trade the stock market is just like learning any new skill.
It’s a skill set that you must develop with the proper steps. The more you learn, the more you apply, the more you realize what works and what doesn’t, the more experience and success you will gain.
It may seem intimidating at first, but the more you get into it — the easier it will become for you.
So let’s get into the most important steps you need to take in order to become a Stock Trader.
Number one: Educate Yourself.
Do you buy bananas without checking them first?
Do you get into college or apply for a job without knowing about it?
Do you marry someone without getting to know them first?
Then how can you put your money in the market without knowing anything about trading?
Wise people always do research and educate themselves before rushing into anything. There’s so much information on the Internet that learning basic stock market concepts can definitely seem overwhelming.
Trust me… I’ve been there too.
So, you might be wondering, how can I familiarize myself with the basic concepts of investing?
Start off by reading a book. Books build a solid foundation to work off. Keep in mind, it does require dedicated time, effort, and focus. But reading is the most genuine way to learn about any topic.
A few of my personal favorites are Trading for a Living, Market Wizards, and Trading in the zone.
After reading a few books, you’ll be able to develop a clear image of your topic, and what it is that you need to know more about.
While books can point you in the right direction, they are not substitutes for experience.
Ask yourself, can someone be a good surgeon just by reading books?
While reading is an important part of a surgeon to gain knowledge, the operating room is where they actually become skilled.
That’s where step two comes in…
Number Two: Open up a Paper trading account.
A paper trading account is an account where you trade the real market, but with fake money. The great thing about a paper trading account is that you get a feel of how the market works without risking the chance of losing your money. It helps to builds insight and improves skillsets for your trader’s journeys.
One great platform for a paper trading account is Thinkorswim by TD Ameritrade. Its a No Risk, stress-free practice to help you gain confidence in the market.
Always keep in mind: Your emotions while paper trading does not evoke the real word emotions that are produced when you trade with real money. You may lack lots of discipline in the market when first starting out, but its all a part of the process.
The bottom line is that a professional trader knows the market like the back of his hands… so you should too! From planning to execute to risk-managing, the skills needed to execute these are best developed with a paper trading account.
Speaking of planning to execute…
Number Three: Construct a Trading Plan
Failing to plan is planning to fail.
— Benjamin Franklin
By entering the markets with no proper plan in place, you’re setting yourself up for some major failure.
Come on… You don’t want to be that person.
You’d be quite surprised to hear how many people don’t even have a BASIC plan set in place. A trading plan will determine the what, why, when, and how. Its YOUR trading personality, along with personal goals and expectations, limiting the mistakes.
You will always be evolving the plan, as you get more details on your trading style, weaknesses, strengths, etc.
If you have a written trading or investment plan, then I would like to say CONGRATULATIONS.
You, my friend, are in the minority.
Although there is no guarantee that a trading plan will lead you to complete success, it does eliminate the roadblocks.