It is a fact that there are a lot of people in the world who have taken stock trading as their main carrier and have tasted success in it. There are people who think their success is out of sheer luck. But on the contrary, it is out of brilliance and prediction because of the proper understanding of the market.
How much can you risk?
This is the first question that you need to find the answer for when it comes to stock trading. It will vary from person to person. There will be people who are ready to lose just a hundred dollars, and there will be people who are ready to lose a hundred thousand dollars. Since the stock market is very volatile, we cannot predict things perfectly and that too for beginners it is very difficult. Hence for beginners, it is better to take calculated risks. So zero down to the perfect numbers and proceed further in the initial stages.
Opt for long term investments
Short term investments cannot be your forte if you are beginning out as a stock trader. Hence it is better to invest in long term investments as there good possibilities of getting better returns. We are not saying that short term investments will not fetch anything. But at the same time, the risk involved in short investments are very high when compared to long term investments.
Being emotional while trading stocks is a strict no. One simple statement will clarify things. You need to invest in profit-making companies, not in companies that you like. There are a lot of people who have lost a lot of money because of their emotion-driven decisions. So be as emotionless as possible while trading stocks.
Basics are mandatory
Not just for the stock market, being strong in the basics is necessary for every field. Some of the basic things that you need to know about the stock market are EPS( Earns per share) P/E ratio, ROE (Return on Equity), CAGR and so on. By having some knowledge in the field, you will able to start with the trading process confidently. If not you will be totally blanked and it will definitely be a tough situation.
Leverage refers to borrowing money for buying stocks. There are actually banks that offer margin accounts, and few financial firms offer fifty percent loan of the stock value. Leverage can be very useful once you become very experienced in the field. But for beginners, it is not something that we would advise. It is because there are possibilities that the investment might not get the expected returns and they will need to pay the money from their pockets.
Diversify the investments
This is one of the common advice that you will get from your experts. Rather than dumping everything in the same area, it is better to divide it into parts and invests in various things. Even if one does not work out the other might.