Do you want to know how to get started in stocks but don't know where to begin? For or starters, 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 I'm going to give you three simple proven steps for newbies to help you become a day trading pro. They worked for me, and they will work for you if you implement them properly.
How to Get Started in Stocks
- Here's how to get started in stocks:
- Learn differences between trading and investing.
- Learn differences between stocks and options.
- Choose which is best for you.
- Next determine your trading style: day trader, swing trader, 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 thow to get started in stocks - profits can and will come with practice, the right tools, and the right education.
Build your foundation correctly and you will succeed. Getting off to a bad start often sours people away from the stock market.
We don't want you to be 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. After you make it through this post be sure to check out our how to make money in the stock market for beginners post to learn more.
Alright lets get down to it.
I'm entirely convinced if you build your foundation correctly by following these three important building blocks that you will succeed. If you're wanting to be a pro and learn how to invest in stocks, make these a part of your trading mantra.
- Regulate Your Emotions
- Manage Your Risk
- Trade For Skill
2. Control Your Emotions
Oh those pesky emotions. Sneaking up on us when we least expect it. Who hasn't acted rash under pressure, when the stakes are high?
A burning question for many traders learning how to get started in stocks is “Why do most traders fail?”
To answer that, let’s imagine three different traders place an exact same trade and all of them lose money. You'll learn more in our how to start investing in stocks post.
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 his or her earlier loss, and sadly, end up losing even more, that day. Maybe he comes back later that same day, and "revenge trades" and loses more. Ouch!
The third trader will take a break from trading, get some fresh air and reset his or her emotions. Then come back, re-evaluate strategy, wait for a clear signal of opportunity, and place a good trade that breaks even by the end of the day.
A trader with a plan, is a trader who is in control of his emotions. Remember that.
3. 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 investor Warren Buffett says, it's the ability to control one's emotions that lead other investors to crash and burn is the key to being a successful investor. Buffet has an incredible track record in the investing world, and is full of wisdom like this.
Simply put, 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 become a day trading pro.
4. 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 all kinds of 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 case.
Sadly, instead of stepping outside of 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. You need to have the same mindset with trading.
Does this sound familiar to you? Perhaps it resonates in other areas of your life. Are you only happy when things good well? Do you get upset when things don't go your way?
In fact, learning to control your emotions goes a long way in how to get started in stocks as well as other areas of life. Make sure to check out our free online trading courses for beginners.
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. If you want to become a swing trader then you'll want to have $5,000-$10,000. If you want to become a day trader and avoid the day trading rule then you need at least $25,000.
1. Risk: How to Get Started in Trading
The difference between new traders and seasoned traders is the ability to limit risk. Your job as a trader is to manage your risk and your account, it is not buying and selling stocks. That 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?
2. 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 if you're trading the wrong stock, you'll definitely lose money. 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.
You must AVOID 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).
3. Stop Losses: How to Get Started in Stocks
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 the heck just 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 hard earned dollars in your account. 2% of $50,000 is $1,000. What this means is that in every trade you don’t put more than $1,000 at risk.
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 in this case.
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. Take our basic stock course.
4. Deciding What Share Size to Take
One share, 10 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, then you have no choice but to trade in smaller numbers of shares.
Besides, I don’t care who you are, if you can’t make money trading from a $500 account, you sure as heck aren’t going to make money trading a $5,000 account. Seriously, there's no different here other than a few zero’s. Getting started in stocks you should at least have a few hundred saved up and an incredible amount of patience!
Why would I dare say that? Well, for starters, if I have a tried and tested strategy that works over and over, why would it matter the amount of money I’m trading with?
What’s important is that I took the time to find that strategy. Hear me, FIND the strategy.
How do I do that? Well, keep reading….We teach this live in our trading rooms daily. The team is always here to here to help you figure out how to get started in stocks!
5. Investing in Stocks 101
Successful traders are those who trade for skill and not for the money. Hence, why almost all professional traders hide their Profit and Loss (P&L) column while in a trade. They have no interest in seeing how much they are up or down, they don't want or need money controlling 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, simple as that. They respect their stop loss. When they are down, they exit immediately. Simple as that.
6. "Test Drive" How to Get Started in Stocks
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.
The majority of 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.
Start Your Practice With Us
As straightforward as all this might sound, it’s rarely such an easy process without the right help.This is because it takes dedication and time to develop a personal strategy that will give you an edge.
In conclusion, here at the Bullish Bears we openly share our strategies with anyone willing to take the time to learn stock trading. Perhaps that's you?!