The news is full of stories about people who managed to get rich by investing and trading on the stock market. What most people often think is that they are just sitting at home and looking at the computer. Many people have similar questions like, Can I do it? Is it really as easy as it looks? Or how can a newcomer trade and earn while at home? And the most common question – where to start?
The first thing to do is to study the basic concepts and principles of the stock market, learn all about the features of trading on an exchange, and understand the methods and rules of the game.
To the average person not familiar with how everything works, the stock market sounds like something completely distant and complicated, but at the same time tempting since it is a great way to earn money. Stock trading does not necessarily mean that someone has to be an expert in order to do it, but some prior knowledge is desirable and necessary. As in any other area, there are some basic things that everyone who wants to manage and be successful must know, and the same goes for the stock market. There are a few things that everyone should pay close attention to in order to avoid huge losses, but at the same time, everyone must understand that this type of investment certainly carries some risk.
When we talk about investing money in general, the first thing any potential trader should evaluate is the level of risk they are willing to bear. If this readiness does not exist or is minimal, then they should turn to the least risky types of investments such as savings in a bank, purchase of government bonds, etc. These types of investments carry a low level of earnings because they are low-risk.
Although this is a much safer way of making money, it cannot be compared with the stock market, which carries a much higher level of risk but a potentially higher income. These investments are for those willing to bear a higher level of risk, who feel that they can control it as much as possible. And in return, make a nice profit. The higher the risk, the better the money, but it doesn’t always have to be that way, which everyone will see for themselves as they get more experienced in this field.
Famous stock exchanges have a vast number of stocks in which people can invest, but to do anything and start trading, everyone first needs to ask themselves how much risk they are ready to take. Those who prefer not to risk too much can choose a variety of stock actions, like big and famous corporations. These companies offer products or/and services whose demand is inelastic, which means that it is constant even when there is some kind of crisis. On the other hand, if you are a newbie but more prone to taking a risk, shares from sectors and companies that are growing and yet to reach their peak are the ones to put your money in. Of course, as there is too much uncertainty, those shares can rapidly grow or crash, but with the right info, some experience, and courage – it is possible to choose the right ones.
When we talk about how hard it is to know everything and live in the stock trading world, especially for newbies, we must mention mistakes that most beginners should be aware of as they can often make them. Those mistakes are usually about pretty basic stuff, but they can happen in the heat of the moment. A great example of that is when investors buy shares that they heard about from others, without any (or little) previous personal knowledge about them. Mass or crowd psychology can have an enormous impact on beginners as they could follow some rumor or people that are buying stocks just because of that, and nothing else. Needless to say that at specifically that timing, it’s precisely what no one should do, as it is the time when those shares are most expensive. Like in any other profession, knowing some things, like basic economics and finance, is a must, along with having a common sense of logic.
Analysts’ have a huge role in every business, as they will sum up all the things you need and want. Without them, this whole world will look completely different, and who knows what will actually happen. After understanding this, another crucial thing is to learn how to apply that gathered knowledge and put it to use. And that is a tough part. Many people wonder if they could learn everything about the stock market by themselves, and yes, everyone can do that, but be aware that it will take some time. When you feel ready, but truly feel ready, then it is time to enter the stock market world.
It is crucial to understand that things like how analysts earn money per share or income are not that important. What everyone who is trading or plans to start doing so in the near future should do is to look at officially published results and compare them to analysts’ expectations, and they will get the basic principle of trading stocks. It may sound boring or less interesting, but it is a great way to start, and if the results beat expectations, the price will probably go up and vice versa.
Thanks to technology, nowadays, a lot of demo versions are available where everyone can practice and get the sense of trading. It is not the same, far from it, but it is as close as it gets to the real action and something that every expert in this field recommends.
When you begin, feeling like you know everything there is about the stock exchange will not lead you to anything good, and in a world where things can change so rapidly, knowing everything is simply impossible. That is why, before any action, you should carefully review all the info and learn the phrases traders use. It will make your job much easier, and you will earn much more, or at least avoid huge losses.
To summarize, the short answer is yes – it is quite difficult for newbies to get their way around and learn how to trade. In order to succeed, some of the most important things that one trader, especially a beginner, should have are patience and learning how to deal with emotions, especially those negative ones. After knowing all this, and if you feel ready to start trading and want to know the latest stock market news and get some great free advice, you can read more about that here.