A stock trader chooses for a reason.
A stock trader chooses for a reason.
Why does a beginner stock trader prefer all other financial instruments? There are several objective explanations for that:
The stock market as a whole shows positive dynamics.
Except for the change of the securities exchange rate difference, it is possible to earn on dividends, though not in every case.
Buying shares is similar to owning company property.
Preliminary practice on a trading simulator is possible.
Maximum information can be found on well-known corporations. For example, a trader will like Google, Microsoft, Amazon or Facebook shares - and he will immediately know the latest news on the giant corporations. Informed investment decisions will be made based on this news.
How does a stock trader select for work?
Not all securities are equally well suited for personal enrichment. Here you need to make a selection on those assets, with which the implementation of the selected trading strategy will be as easy as possible.
If you are going to buy and hold an asset, focus on the unicorn company. They grow slowly, but reliably.
With a high-risk approach, it is allowed to choose the papers of young promising firms - they can show a growth of 2-3 times in a short period of time.
Undervalued shares are those that are below their book value on the exchange. Over time, the market will allow quotes to grow to a fair price.
If you aim to make a profit in a very distant future, then choose financial instruments with smooth growth curves and maximum dividends.
If you are focused on short-term gains, assets with high volatility will suit you.
What mistakes should not be made?
In the list of the most frequent mistakes you can find the following: Share trader choice.
Trade without plan and preparation. Several reaction options to changing market conditions must always be developed, and several charts must be analyzed before entering the market.
Excessive self-confidence and unwillingness to fix losses. There are two states of the tilt, when in the first case a person is in euphoria from an accidental win, and in the second case he is depressed by an unexpected loss. In both situations, you can do things that you will later regret. Therefore, acts strictly in the system.
Too much risk - yes, associated with no less impressive returns. However, you can get huge losses, if the market goes against you.
Fighting the trend is unreasonable, except when there are reversal figures. But everything is relative, so try to follow the trend until it is replaced by another momentum.
Position averaging. You can use this method only to buy more attractive stocks at a reduced price. Because over time, they'll go up in price and make you richer.
A floating loss or profit is almost identical to the real one, because the price of the portfolio is determined by its value at the moment. So do not wait for the minus to become uncontrollable. Cut off the losses at the right time.
Hold on to your "favorite" shares. Trading is not a question of personal predilections, but a way to make money. So look for the financial instruments that give you a higher income.
Deposit your broker account with borrowed money. Think about the fact that after draining the deposit, you just have nothing to live on - or maybe even nowhere. The stock trader chooses
Investment portfolio formation
When you buy shares, let 70-80% of them have a slight volatility, while the remaining 20-30% is high risk. At the end of each reporting period you should rebalance your portfolio. Automation of trading processes can be entrusted to robots, but the main work with transactions is done manually.
There is also some very pleasant news for the trader on shares. The stock exchange rate is not directly dependent on the value of currencies or raw materials stocks. The crisis in the state or on the world market may not affect individual companies. Investments in assets of large corporations are much easier to predict than changes in the market for precious metals or crypt currencies.