How to Advance Faster in The Learning Curve when Trading Stocks?
The increasing popularity of zero-commission trading platforms has attracted thousands of non-professionals to the financial markets.
This group of people comes with the expectation of making some money through activities such as day and swing trading. However, they often ignore that trading can be a highly complex endeavor that requires a profound understanding of how the markets and human psychology works, and that makes their learning curve steeper than it should.
In this article, we share a few recommendations that could help beginners in their journey toward becoming successful traders, going from the positive contribution that participating in active traders and investors community could have to pick the best brokerage firm.
#1 – Select the best broker for you
The first step that could make your journey easier is to pick the right brokerage firm to work with. Several variables should be taken into account to pick the provider that fits you the best starting with the portfolio of available assets that the platform supports whether you want to trade stocks, cryptocurrencies, or contracts for differences (CFDs).
Next up, you should look at the fee schedule to identify how much it would cost to make a single trade. Make sure you incorporate all potential costs including fees, commissions, and spreads.
Finally, available payment methods, non-trading fees, regulatory coverage, and trading software are also factors to consider when picking the best provider.
#2 – Take a course about technical analysis
Technical analysis is the cornerstone of trading. This discipline consists of assessing price action and volume indicators. Learning about TA and developing and testing multiple systems is crucial to creating a reliable and systematic approach to trading that ensures an elevated win rate.
Moreover, you should also learn about risk management procedures such as position sizing, stop-loss orders, and portfolio correlation to limit your potential losses as much as possible while letting your winners run their course to offset the losers.
#3 – Perform your own analysis before listening to others
The internet and platforms like YouTube are full of videos, tutorials, market digests, and opinions from experts and fake experts who want to sell you their view about a certain stock trading opportunity – for one motive or the other.
Acting based solely on those recommendations is not advisable and could lead to severe losses as no analysis – regardless of how deep it appears to be – guarantees a particular outcome.
Moreover, the psychological side of trading demands a lot of discipline and stomach to tolerate price swings. When that happens, if the trader has not performed his own assessment of the opportunity, the odds of panic-selling increases, and the resulting losses can cripple your ability to produce profits in the long run through this activity.
#4 – Join and participate in a community
Learning alone is boring and often slower than tagging along with other people who share the same interest and whose curiosity can lead to the development of collective wisdom.
Many websites nowadays have created spaces on which traders can communicate and share ideas to enrich their journey. Participating in these forums can reduce the length of your learning curve the most.
#5 – Ignore the media’s noise
Mainstream financial media makes a living out of traffic and visits to their websites, newsletters, and other similar materials. Therefore, they will always try to push potentially cataclysmic headlines and gloomy outlooks as research shows that readers are drawn to this kind of content.
With this in mind, keeping yourself plugged to the narrative that the media is adopting about the overall state of the market, an individual stock, or other similar topics can lead to wrong conclusions about what’s coming next and may discourage you from executing trades that follow a thoroughly conceived trading system.
#6 – Look at the macro trends
Trading with the trend is one of the best recommendations that any trader can receive unless you are what some call a contrarian – somebody who bets that everyone else is wrong.
Since being a contrarian demands a kind of wisdom that not many of us possess – especially when starting out – it can be easier to make money in the stock market by following the overall trend rather than going against it.
When it comes to stocks, both the performance of broad-market indexes like the S&P 500 and Nasdaq 100 along with the yield of the US 10-year Treasury Note are among the most relevant pointers to keep an eye on.
Their performance typically provides a good picture of the state of the equity market and the direction it could take in the future.
We hope that these recommendations can help you out in achieving success in trading faster than most would. Keep in mind that, like everything in life, the path toward becoming a profitable market participant is full of challenges but the good news is that most of what you need to learn is already available on the internet.