There are a lot of people out there who have big dreams of trading stocks to make a bit of extra money on the side, or maybe even taking it up as a full-time profession. In reality it isn’t as easy as it sounds. If you don’t know what you are doing, you can lose big.
My name is Kavan Klein. I run an interactive stock-trading platform called Trade with Kavan that provides investors the tools they need to succeed, including a chatroom with live screen-sharing, audio alerts, news, and real-time education. I formed Trade with Kavan after studying charts and price actions on my own and coming up with trade strategies that would allow for success, with little risk.
In this article, I like to give beginners some pointers to keep in mind when getting started trading stocks.
One of the first things someone should do when getting started is to learn the basic terminology associated with stock trading. This includes terms like outstanding shares, dividends, earnings per share, market capitalization, price to earnings ratio, and a lot more. I recommend going back to your grade school roots and just making simple flash cards with all the terms, then going through them over and over. Start with the basics and add more complex terminology as you go. Of course, everyone learns differently, so if this method doesn’t work for you, find something that does.
After learning the very basics, the next thing to keep in mind is to always have an established entrance, exit, and escape price before making any trades. These established entrance and exit points will keep you from losing your skin and helps to establish discipline, which is extremely important for any trading strategy. I can’t stress this enough; if you don’t have discipline, emotions can get in the way of your trading, and the results can be disastrous.
Though it may sound tempting at first, you absolutely should avoid buying on margin. This is essentially like getting a loan from a broker, and puts you in the red before you even begin. You also have to pay interest on the loan, which can cut sharply into any gains you do make. Until you become an experienced investor with a proven track record of success, you shouldn’t even begin to think about buying on margin.
Chart patterns are another important aspect of trading that people should know about. While some people swear by them, others feel their usefulness is exaggerated. At Trade with Kavan, we take chart patterns into account and recommend doing so. Every new investor should know what the most common stock patterns are, and, more importantly, should be able to identify them.
Another invaluable tip I like to share with those new to trading is to keep a record or journal of every trade made. It could just be in a notebook, a spreadsheet, or whatever. When I was getting started, recording my trades was one of my main resources for learning. I tracked my mistakes and my successes, and eventually was able to develop a pattern that allowed me to replicate the successes and avoid the failures.
All of this can be overwhelming at first, and that’s understandable. That’s why we recommend seeking guidance from more experienced investors when getting started. Just like any subject in school or anything else in life, sound instruction will be one of the most important things that factors into building a solid knowledge base, which will enable future success.