3 Things You Need To Know About Trading
There have been lots of huge stories happening in the financial industry over the last few years, but one of the biggest has been that more people are taking control of their finances and educating themselves about wealth.
Millions more people around the world have started to buy and sell on the Stock Market, thanks to services like Robinhood, Stash and other apps that empower people to trade anywhere, anytime just by using their phone.
At the same time, millions of people started businesses in 2020 and 2021, often for the first time in their lives. The number of new businesses created recently has broken records in many countries, including Canada and the US.
The net result is that more people than ever have decided to take control of their finances and try to create real wealth through investment and entrepreneurship.
If you’re one of those people that wants to but feel like a beginner about these weighty topics, here’s a few things you will want to know.
If you don’t have enough savings to immediately quit your day job and start trading stocks, then you will have to consider the best way to make that transition. It will take time. If you feel like you need to educate yourself about finance and economics, then find the time to pursue that knowledge first.
Also, you can’t trade stocks without the money to buy them. So having consistent income from a day job will help you get off the ground and serve as insurance for the inevitable mistakes you will make on the way to trading greatness.
Professional traders will often spend eight or more hours a day working, researching and trading. To get to that point will take time and patience, says Jack D. Schwager, the author of The Little Book of Market Wizards: Lessons from the Greatest Traders.
“There is no single market secret to discover, no single correct way to trade the markets,” Schwager said. “Those seeking the one true answer to the markets haven’t even gotten as far as asking the right question, let alone getting the right answer.”
While trading can just seem like a complicated game to the casual observer, it takes in-depth knowledge of economics and finance to fully understand the Stock Market well enough to make intelligent and lucrative trading decisions.
One of the prerequisites of becoming a master trader is a robust education in the basics of economics, financial markets, and technical analysis, which is an essential tool used by traders.
Most people start by revisiting the concepts they might have learned in their economics class in college, and then move on to the actual mechanics of the Stock Market and the tools for analyzing market trends.
Ultimately, you’re looking for patterns, says famous investor Ifan Wei.
“Patterns don’t work 100% of the time,” Wei said. “But they are still critical because they help you define your risk. If you ignore patterns and focus on hunches, feelings, and hot tips, just forget about achieving consistency.”
Find People to Help You
Perhaps the most important thing you can do on this journey is find people that can help you.
It’s easy to believe that you should be everything by yourself, but it’s not necessary and there are some good reasons to believe you are more likely to succeed with a mentor.
Matt Choi runs the trading education website Certus Trading. Choi believes finding the right mentor is among the most crucial ways that new traders can learn to be successful, and has written extensively about common mistakes to avoid.
“When I was just starting out, I was lucky to have the guidance of a mentor who knew how to help me along my journey,” Choi said. “That person taught me everything there is to know about trading strategies, but much more importantly, he helped me discover who I am as a trader.”
As Choi says, the final lesson is to learn your own approach to trading. If you refuse to give up, you just might get there.