Trading, to some, is synonymous with financial gain... to others, financial loss. It is an aspect of the financial sector that the average American knows little about. One of the biggest reasons for this unfamiliarity can be broken down to one factor: fear. There are lots of things to be afraid of in life, but the reason for most fears is just simply not understanding the object of the fear, in this case trading. Most people look at the stock market and financial decisions and want to run and hide. The fear of making a mistake is so inherent that they do not make a choice which in reality is a choice in itself.
So what are we to do about this? Education - it is the key to understanding and conquering any fear. One of the best ways to get educated is not from a textbook, but from real people who live in that world, who wish to share their knowledge with us of how to navigate becoming a budding stock trader. We asked some experienced traders for the advice they would give to traders just starting out... and now we’re passing that wisdom along to you.
Our first tip of the trade comes from Blain Reinkensmeyer, a hobby momentum trader and Partner at Reink Media Group:
Trading is a life-long game. Do not get caught up in the get rich quick type mentality. Take your time, learn from every trade, and remember that while it takes 10,000 hours to become a professional at anything, becoming a successful trader requires not only dedication but also a true passion for the market.
Blain’s blog StockTradingToGo provides free stock education and daily market recaps to over 16,000 subscribers. He is the author of 'The Interactive Guide to Technical Analysis', found at InvestingTeacher.com, and heads the StockBrokers.com annual online broker review.
Our next set of tips comes from Rachel Fox, a remarkably productive young woman who, at the age of 17, has an impressive portfolio and the knowledge to give us this great advice:
My first piece of advice is to learn how to track and understand a company’s Earnings Reports and how they impact that company’s stock price. Anyone who is involved in investing or trading knows about Earnings Reports and knows that these reports can potentially greatly impact a trade.
Secondly, but just as important,
The timeframe of a trade is different from one trader to the next and, unless you buy and sell at the EXACT same time as a person you take tips from, your results will be different. Also, even if someone loves a stock and can tell you a billion reasons why it is wonderful, you should research it on your own to decide if you want to trade it based on its fundamental analysis and/or its technical analysis. So always be sure to do your own fact checking!
Rachel is a daytrader, actor, musician, runner, and aspiring pilot, and she helps at-risk youth reach their full potential. Fox on Stocks is her stock trading blog that she writes on finance topics and pop culture and how these events affect stock prices. Fox is also producing a series of short videos entitled "The Fox on Stocks 8 Core Videos" to encourage and educate others about online trading so they can trade and invest themselves.
Our third expert is Norman Hallett co-founder and CEO of many successful businesses, and the recent author of his eBook, “Mental Fitness for Traders”:
The value of momentum. Not market momentum, but 'winning and losing trades' momentum. As traders, we tend to trade in streaks… trade-by-trade streaks (winning and losing trades in a row), streaks of winning days, weekly streaks and monthly streaks. You need to dig deeper and understand HOW winning momentums get started and how losing momentums get started. Only THEN can you focus on making sure you have a preponderance of one and not the other.
Norman’s second piece of advice:
EVERY successful trader will tell you that the turnaround in their trading success happened at EXACTLY the time they paid full attention to their trading discipline and how to get better at pulling the trigger without hesitation, overcoming fear and greed, etc. Over 90% of traders lose money. Over 90% of traders pay little or NO attention to their trading discipline.
Keep up with Norman’s latest tips at The Disciplined Trader or on his YouTube Channel which features his weekly “4-Minute Drill for Traders”. A former radio show host, Norman’s high-profile style resulted in him being a frequent guest of top news programs.
Our fourth trader is Nathan Michaud who began trading in 2003 and has been doing it full-time since his 2007 graduation from the University of New Hampshire with a degree in finance:
It's not about the gains, it's about the losses. Minimizing losses is what keeps you in the game; one trade if you let it ... can take you out of the game. Gains add up SO FAST - don't let one trade dictate your trading career. Trading isn't about hoping that a trade works for you - it's about having a plan and sticking to it.
Another great piece of advice for the rookies out there:
Don't compare to others, stop trying to hit home runs. It's a lot like baseball - if you step up the plate trying to hit it out of the park every time there is a good chance you strike out. It's better to get on base, singles and doubles score RBI's and when you're not trying ... you hit it outta the park!
Nathan is currently a member of the profit.ly team. He has positively impacted hundreds of new traders by sharing the trades he makes and explaining how he anticipated and executed them in his daily recap videos. You can follow Nathan on his site, InvestorsLive.com.
Our final piece of advice for venturing into the world of trading comes from Ron Acoba a Chief Investment Strategist and Equity funds Manager at Trading Edge Consultancy where you can raise your financial literacy and learn more about trading. Ron has this advice for us:
Study. Read up on news. Get your hands wet. Observe how the markets move. Learn technicals, fundamentals and portfolio management. Always do your due diligence and never place good money on speculative stocks.
There you have it - great advice from those who know what they are talking about. The real question is, what are you going to do with it? Hopefully with the education you have gleaned today that fear we talked about in the beginning has diminished if only slightly. There are very solid guidelines that any person can use if they wish to venture into the exciting world of trading. Remember, do not fear something because you do not understand it, do your research - you might be surprised what you can learn.
Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Cogenta Computing, Inc. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.