While many people have not been successful in stock trading, many others have been smiling to the bank. This implies that stock trading comes with some risks. Warren Buffett is a living testimony of the prospect that lies in stock trading.
Your success depends on your strategies. This is why this article outlines some important tips that will make you succeed in the business of stock trading. So, without further ado, here are some important tips to apply if you want to become a better stock trader.
1.Look for a mentor
Of course, there are numerous free resources on the internet on stock trading but all these resources are not enough. It is important that you look for a mentor. Someone who has been successful in stock trading for several years has to guide and lead you by hand. Making initial profit does not make you an expert because it has misled a lot of newbies. They made some profits in their first few trades and they thought they were good and they staked higher amounts and lost. So, if you must go far in stock trading, look for a mentor.
2.Read a lot of books
There are several books that offer a lot of useful information on stock trading and the costs of these books is nothing compared to the costs of DVDs, seminars, workshops, and classes. The more books you read, the more knowledgeable you will be.
3.Plan your trade
It is important to have a plan before you start trading. Remember, your strategy does not have to win all the time for you to be successful. Winning just 60 percent of your trades already makes you successful. Don’t hurriedly change your plan because of a few losses. It is important to plan your trade but it is more important to trade your plan.
4.Trade only with the right mindset
Learn to stay away from trading when you are not in the right frame of mind. Stock trading is nothing but a mental game and you can’t possibly make sound decisions when you are going through an emotional trauma. To avoid making your situation worse, trade only when your mind is sound.
5.You don’t have to trade every day
The most successful traders don’t trade stock all the time. They only trade when they come across a strong signal. If you have to trade every day, you will be forced to trade even without a clear signal. It is often better to walk away when all your analyses do not produce a clear signal.
6.Diversify your investments now
As a newbie, it is not advisable to put all your eggs in one basket. You can invest in different stocks. However, experts believe otherwise. The likes of Warren Buffett prefer to invest hugely in one product and monitor their investment and when it seems like the value of the stock (their investment) is about to drop, they will liquidate the stock. After all, stock trading is about seeing opportunities before they become obvious.
7.Watch out for pump and dump
You must have heard of the phrase – pump and dump. A group of people can promote a particular stock to deceive investors that the stock is very valuable. When investors buy into it, the promoters will recoup their investment and pull out. Then, the reality will dawn on the investors. So, when investors suddenly begin to buy a particular stock and its value starts rising abruptly, don’t just join the bandwagon. It could be a pump and dump situation playing out.
8.Don’t depend too much on robots/software
People use stock trading robots but the truth is, no software or robot can continuously make profits. Your robot will only make some profit for a while and stop. Secondly, you can’t grow your stock trading skills when you rely on robots. This is why experts don’t believe in robots. In fact, they think their skills and experience makes them better than any robot.
9.Always hunt for news
Most successful stock traders always keep their ears to the ground for news because it determines what goes on in the stock market. You don’t want to be the last to discard a stock whose value is about to crash.
10.Listen to Warren Buffett’s advice
Warren Buffett, fondly called the wizard of Omaha, is the greatest investor of all time. Fortunately, he gives a lot of advice on stock trading regularly through several mediums. You may need to follow him and watch out for his comments always.
There may be many other tips to become a better stock trader but you are okay with the 10 tips outlined above. When you apply them to the letter, you will increase your chances of making profits tremendously.