The most valuable advice that I have ever received was quite simple: “Don’t just look at the chart… Trade it.”
10 Best Tips for New Traders
- Patience: Learning to trade doesn’t happen overnight. You need to be patient and spend some time on this. It takes effort to be a successful trader.
- Losses: As a new investor, be prepared to take small losses. You need to find your feet in the market. And you learn through this process. When you paper trade you are not emotionally involved.
- Stops: Always have a stop loss in place. When the position goes against you, you should not hesitate to cut it. Never just stick your head in the sand and hope for the best. Hope is not a strategy.
- Gearing: It is not necessary to overexpose yourself. Especially when you are just starting out. You can gear at a ratio of 1x or 2x your available capital. There is no need to bet the house on your first few trades.
- Focus: Concentrate your efforts and get to know a few high-quality trading stocks. There is no need to try and trade everything.
- Penny stocks: Just because something is cheap doesn’t mean that it is better value. When you trade you are looking for movement. The top shares on the market are more and trade all the time – but the penny stocks might only trade once a day. Start thinking in terms of percentages.
- Technicals: Use charts to determine entry and exit points. Always have your entry, profit and stop loss levels written down for each trade. And do not hesitate to take action when you reach these levels.
- Indicators: Just because a charting package has 100’s of indicators it doesn’t mean you should use all of them. Remember, they are only derivatives of what happens to price. Keep it simple. Start off with candles, volume, trend lines, one momentum indicator and basic formations.
- Fundamentals: This analysis looks at a company’s earnings, earnings growth, sales, profit margins, and return on equity among other things. It helps to know about the new contract your company just signed or the strikes or layoffs they are about to face. Keep track of the stocks in your watch list – it can be as simple as just looking at the company headlines on your Bloomberg mobile on your phone every day.
- Emotions: Do not force your trades. Sometimes the best trade might be to do nothing. At the same time, do not just sit and let trades pass you buy. Don’t be afraid to take them – remember, you are protected with your stop in place.