Preparing to invest in stocks is more about knowing the basics, it’s about starting with a strong foundation… or risking setting yourself up to fail from the start. We are providing you with some advice and tips on how to start investing.
You’ve made the decision to invest your money and build a strong portfolio to set yourself up for a financially secure future.
You’ve probably studied glossaries, done some background research, and read over some reports. Maybe you even have a few trades under your belt.
And that’s a good start…
But it’s only the beginning.
Whether you’re thinking about becoming a trader, recently got started, or even if you have some experience but need to fix a shaky foundation, there are simple – yet crucial – preparations you need to succeed. Here are some tips on how to start investing.
You have to be financially ready.
To know where you’re going, you have to know where you’ve been… or at least, where you are now.
Investing in the stock market can be an effective way to increase your wealth… but only if you’re financially ready and know what you’re doing.
Here’s how to you know if you’re financially prepared…
Your major debts should be paid off. You should have an emergency fund stashed away. And you should have some disposable income that you can use for investing.
The money you invest needs an opportunity to grow – if you’re counting on it for other needs or contingencies it may never have the chance.
You have to be mentally prepared.
Trading is not gambling. While there is some risk, it is a game of skill, of numbers, of percentages.
When emotion comes into play, mistakes are made. In fact, two of the biggest trading mistakes – riding losers too long and selling winners too soon – are almost always based on fear, nervousness, or on gut feelings.
That’s why succeeding in investing means understanding your emotions, predicting your reactions… and learning to control them.
If you know your risk tolerance – how much risk you’re comfortable with and are willing to take – it will go a long way towards helping you eliminate emotions and make the smart choices that are right for your portfolio.
Prepare yourself for making important decisions… and resolving to replace feelings with facts.
You must have a plan on how to start investing.
Diving into trading without a plan is like throwing darts in the dark.
Not only do you put yourself at risk by not having the solid data and information to guide you, but you leave yourself open to making snap decisions based on nothing more than hunches.
First, you need to set goals for the big picture. What do you want out of trading? How much do you want to make? What’s your time-frame? How will you make your decisions about when to buy and to sell?
What stocks will you buy… and how will you research your future trades?
But beyond the overall goals, you need to have a plan in place for each and every trade you make.
You should have an entry plan: What you’ll buy, when you’ll buy it, and how much you will buy.
And you need an exit plan… before you buy a single share.
That’s right: you have to know how you’ll get out before you get in.
When will you sell – and how will you determine this?
You’re not expected to make these decisions on your own. There are tools to help you get the information you need, tools that take into consideration your goals, your finances, your risk tolerance, and the individual stock you’ll be investing in.
And knowing your tools – and how they fit into your decisions – should be a major part of your plan.
Tools offered by TradeStops can give you the information you need to do what’s best for your finances, factor in your emotional tendencies, and create a solid plan for each trade.
Know how much of a stock you should buy – with your personal risk tolerance shaping the decision. Know when to get out by tracking the trailing stop point that you’re comfortable with.
Remove the questions, prepare yourself with the answers, and have the foundation and preparation you need to get started as a successful trader.