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Tips For The Complete Beginners Trader

Investing in the stock market can prove to be one of the most rewarding things you could ever do. Just look at Warren Buffet. Over the course of several years he was able to turn himself into one of the most successful investors in the world.

What most people fail to realize is Warren Buffet did not become a successful investor overnight. As a matter of fact, according to BusinessInsider.com, Buffet made 99% of his wealth after the age of 50.

With that being said, let’s dive right in and talk about the 4 investment success tips for the complete beginner.

#1 – Be Patient

Becoming a successful trader takes time. And while there are numerous courses and guides that can help you cut your learning curve in half, at the end of the day experience is still the best teacher. So be patient. Eventually your investments will start to pay off.

#2 – Be Prepared To Take Some Losses

Ideally you would want to make a profit on every trade you make. Realistically however that won’t happen. There will be good days and there will be bad days. Make sure you are prepared to take some losses.

In part two of this guide we will talk about stop loss orders and how to use them to minimize your losses.

#3 – Pick The Right Brokerage

As an investor the broker you choose to work with will play a huge role in your overall success. It is therefore your responsibility to ensure you are working with a reputable broker. Do your research and make sure they have a good track record.

Some of the top brokers that offer you the best value for your portfolio include TD Ameritrade, TradeKing, Fidelity and E-Trade.

#4 – Never Get Emotionally Involved

As a trader you must leave your emotions at the door. The absolute worst thing you can do is get emotionally involved with the stocks you are trading. When you trade based on emotions rather than analytics, you will almost always find yourself on the losing end of the spectrum.

Before you make your first trade take the time to write out a set of buying and selling rules you will follow. It is very important you stick with these rules for every trade you make and avoid allowing your emotions to get in the way. As you become more experienced you can adjust the rules to better suit your trading style.

Also read the following related articles:
How To Become An Expert Trader Part 2 – 5 Things You Must Understand
How To Become An Expert Trader Part 3 – Fundamental Analysis vs Technical Analysis
How you can avoid the top 5 common investing mistakes
Here are top 5 common investing mistakes

Fundamental Analysis Vs Technical Analysis

The idea is to use the analysis from each trade to learn from both your successes and your mistakes. This way you will increase your chances of picking winning stocks on a more consistent basis.

Fundamental Analysis vs Technical Analysis

When it comes to analysis in the stock market there are basically two forms. Fundamental analysis and technical analysis. Fundamental analysis is when you base your investment decisions on a company’s overall earnings.

This would include sales, profit margins, earnings growth over the last three years, earnings per share, return on equity and debt to name a few. Looking at these key factors will help you narrow down the highest quality stocks.

Technical analysis on the other hand is all about reading charts and researching volume trends. With technical analysis you must time your decisions just right if you want to make a profit.

Here are 3 key differences between the two:

With fundamental analysis the core purpose is to produce a value that you as the investor can use to compare the current stock price of the company you are interested in investing in. That value will determine if you will buy, sell or hold.

With technical analysis there is no buy, sell or hold. You literally have to pounce when the time is right.

Fundamental analysis is also very dependent on what takes place in the economy. That means if interest rates are going to change chances are your decision about a particular stock will also change.

With technical analysis what’s going on in the economy doesn’t matter one bit. All that matters is the trend the stock is following, not whether or not interest rates are increasing.

With fundamental analysis the focus is always financial ratios and numbers. With technical analysis the focus is always historical price movements.

When it boils down to it both forms of analysis can be extremely beneficial to your overall trading strategy.

Just ask any seasoned investor and they will tell you the biggest key to making big money is being able to buy the best companies at the right time. In order to do that you must understand the company’s profit margins, debt, current stock price, previous stock price and any support or resistance lines.