Do you want to know how to get started in stocks but don’t know where to begin? The most important lesson you can learn from reading this is that you won’t get rich quickly by day trading. It takes time to learn a skill that will make you money. That time curve is different for every person. That’s why paper trading is important when you first get started.
That’s why I will give you three simple, proven steps for newbies to help you become a day trading pro. They worked for me and will work for you if you implement them properly.
Table of Contents
Introduction on How to Get Started in Stocks
- Here’s how to get started in stocks:
- Learn the differences between trading and investing.
- Learn the differences between stocks and options.
- Choose which is best for you.
- Next, determine your trading style: day trader, swing trader, or long-term trader.
- Open a brokerage account.
- Study differences between technicals and fundamentals.
- Use both in your trading decisions.
- Learn how the different sector rotations work.
- Practice trading in a virtual account before using real money.
One thing that needs to be mentioned before we start learning how to get started in stocks is that profits can and will come with practice, the right tools, and the right education.
Build your foundation correctly, and you will succeed. Getting off a bad start often sours people away from the stock market.
It would be best if you weren’t turned off because we are dishing out harsh doses of reality. On the contrary, we want you to be empowered.
Build your foundation on a house of cards, and you’ll crash and burn.
Alright, let’s get down to it.
I’m entirely convinced that you will succeed if you build your foundation correctly by following these three important building blocks, If you want to be a pro and learn to invest in stocks, make these a part of your trading mantra.
- Regulate Your Emotions
- Manage Your Risk
- Trade For Skill
Control Your Emotions
Oh, those pesky emotions. We are sneaking up on us when we least expect it. Who hasn’t acted rashly under pressure when the stakes are high?
A burning question for many traders learning to get started in stocks is, “Why do most traders fail?”
To answer that, let’s imagine three different traders place thethe same trade, and all lose money.
One trader might become discouraged, curse the market, and give up for the day. Or maybe forever.
Another trader might become frustrated, trade more aggressively to recoup their earlier loss, and sadly, lose even more that day. Maybe he comes back later that same day, “revenge trades” and loses more. Ouch!
A trader with a plan is a trader who is in control of his emotions. Remember that.
What’s the Key?
What is fundamentally different about these three traders? It might surprise you. It’s the way they react to their trades that determines their eventual trading results. It’s the biggest difference.
As billionaire Warren Buffett says, controlling one’s emotions that lead other investors to crash and burn is the key to success. Buffet has an incredible track record in investing and is full of wisdom like this.
But don’t take things personally. The market didn’t do this to you; it’s the nature of the market. That’s what separates the winners from the losers and why we’re talking about the three simple, proven steps to becoming a day trading pro.
Taking Things Personally
So, you mean to tell me that a key reason why many traders fail is that they take their losses personally? Sadly, yes. Their confidence and peace of mind are connected to their trading results. We’ve seen how emotions will play with us in various situations, and trading and investing are no different.
When traders do well, they feel good. When they lose, they become discouraged, doubtful, and question their ability to trade. Self-doubt is a killer in all cases.
Sadly, instead of stepping outside the box and analyzing what went wrong, they react to the emotions triggered by personalizing the events. Psychological resilience often makes or breaks a player in sports. It would be best if you had the same mindset with trading.
Learning to control your emotions goes a long way in getting started in stocks and other areas of life. For more help, check out our free online trading courses for beginners.
| Learn how to read penny stock charts, premarket preparation, target buy and sell zones, scan for stocks to trade, and get ready for live day trading action
|Learn how to buy and sell options, assignment options, implement vertical spreads, and the most popular strategies, and prepare for live options trading
|How to read futures charts, margin requirements, learn the COT report, indicators, and the most popular trading strategies, and prepare for live futures trading
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How Much Money Do You Need to Get Started in the Stock Market?
How much money do you need to get started in the stock market? The minimum you want to get started is $1,000. You’ll need $5,000-$10,000 to become a swing trader. If you want to become a day trader and avoid the day trading rule, you need at least $25,000.
The difference between new and seasoned traders is the ability to limit risk. Your job as a trader is managing your risk and your account; it is not buying and selling stocks but investing in stocks 101.
How do you manage that? Ask yourself three questions.
- Am I trading the right stock?
- What share size should I take?
- What is my stop loss?
Trading the Right Stock
Remember, risk management begins with choosing the right stock to trade. You can have the Ferrari of all platforms and tools, but you’ll lose money if you’re trading the wrong stock. That’s how you get started in stocks.
Here’s an easier way to nail down stocks suitable for day trading and what criteria you should look for.
It would be best if you avoided stocks that are:
- Heavily traded by computers and institutional traders
- Low in volume – I stay away from anything less than 300,000 relative trading volume. However, that’s just me. I don’t want to get stuck with shares I can’t unload
- Don’t have any reason to move (no fundamental catalysts).
Nowadays, a common mistake for many new traders is to go all in and lay all their cards on the table. Soon, the trade goes in the wrong direction; all their money is gone, and they sit there wondering what happened. Sound familiar?
An easy way to remember what your stop loss should be is to think of a carton of 2% milk. That’s right. Milk. 2%. Repeat after me: YOU SHOULD NEVER RISK MORE THAN 2% OF YOUR ACCOUNT ON ANY GIVEN TRADE.
Say you have $50,000 of hard-earned dollars in your account. 2% of $50,000 is $1,000. This means that you don’t put more than $1,000 at risk in every trade.
If you only have $1,000 saved, that’s ok too. The formula is the same. For every trade you enter, you only risk losing 2%, which is $200.
It’s really important to me to live to trade another day. As a result, with every single trade I enter, 98% of my account is protected. Make it one of your unbreakable rules like it is mine.
One share, ten shares, or 100 shares? What about 1,000 shares? This depends on your account size and a jug of 2% milk. If you only have a small number of funds for day trading, you have no choice but to trade in smaller shares.
Besides, I don’t care who you are; if you can’t make money trading from a $500 account, you sure aren’t going to make money trading a $5,000 account. Seriously, there’s no difference here other than a few zeros. Getting started in stocks, you should at least have a few hundred saved up and an incredible amount of patience!
How do I do that? Well, keep reading….We teach this live in our trading rooms daily. The team is always here to help you figure out how to get started in stocks!
Final Thoughts: How to Get Started in Stocks
Successful traders are those who trade for skill and not for money. Hence, why almost all professional traders hide their Profit and Loss (P&L) column while in trade; they have no interest in seeing how much they are up or down; they don’t want or need money to control their emotions.
This is because they have a tried and tested strategy and set of criteria for when they will enter a stock. They focus on finding these setups, and when the criteria are right, they enter. They respect their stop loss. When they are down, they exit immediately. It’s as simple as that.
It starts by practicing in a simulator to “test drive” it first. Secondly, have you heard of the lovely term “backtesting“? If not, buckle up.
Most good software allows you to go back in time and have a back-to-the-future experience. It’s like a time machine where you can “see” if your strategy would have worked.