Can you really make money trading in the stock market? This is a question that most stock market beginners ask, and the answer is yes, but only if you follow the following rules.
1. Stock Market Education – Many naive traders and investors believe that they can make money just by listening and following advices and tips from the “Gurus”. If that were the case, then most of us will become millionaires in no time. Unfortunately, that isn’t the case. It is a good idea to get tips from top traders and investors, but it is not a good idea to trade their tips blindly as that will for sure kill your portfolio. Instead, what a stock market beginner should do is to learn how the stock market works inside out. There are a few ways where you can get free or pay education. You can start with the top 10 technical analysis books that I recommended in an earlier post.
2. Discipline - Stock market is a discipline game and you must learn how to be discipline. Greedy traders or investors with fear won’t get you long in the stock market journey. You must learn how to control your emotion and follow your rules all the time. For example, if you have a 5% stop loss on a stock, then you must sell the stock when it is down 5%. Some traders never follow their stop loss rules. When their stocks are down, they just wait and “hope” the stock will somehow magically go back up and unfortunately they never did. They turned a small loss into a big one, and a big loss into an unrecoverable loss. Remember, a 50% loss on a stock takes a 200% gain just to break even.
3. Money Management – Money management skills are important if you want to trade in the stock market. First of all, you must start with the money that you are afford to lose. You cannot trade with the money that you need for emergencies such as money for your kids’ college, retirement money or health insurance. The reason is simple, you will never be able to make the correct decision when you trade with fear. Second, you must learn how to manage money properly across all stocks on your portfolio. For example, if you own 5 stocks, and a 25% loss on one stock will mean a 5% loss on your whole portfolio. Therefore, you must watch all your stocks closely and cut loss when a loss is impacting your whole portfolio.
4. Subscribe to other trader’s and investor’s blog - It is a good idea to subscribe to a few of trader’s blog and learn from them. Read their market commentary and trading strategies and try to apply their strategies on your own trading style and see if it works out for you.
If you want to learn more about stock trading, download my free 115-page ebook “Stock Market Winners“.
