6 Essential Tips for Beginners in the Stock Market

I started investing in the stock market Y2014. I did not know much back then, which is why I frequently follow tips of so-called gurus. They were useful, at first, until they weren’t. So, I felt that I needed to learn what they know. That’s when I began studying. If only I could bring back time, here are some basic stock market beginner tips I wish I knew when I was just starting out.

1. Learn BOTH Fundamental and Technical Analysis

   • Being spoon-fed on what stocks to buy and sell by the so-called stock market gurus is never a good idea in the long run. It will be best if you know what they know firsthand by studying the stocks yourself. This will help you filter which tips are credible and with basis, and which aren’t.
   • Now it is important that you learn both fundamental and technical analysis of the stock market. It is wrong to assume that investors should only learn the fundamentals, while traders should learn the technical. Learning them both will give you an edge whichever you want to be, may you be an investor or trader. It will give you the right sense of a stock and it will help you decide the most appropriate time to enter and exit.
   • So what is the difference of both analyses?
     • Fundamental Analysis, according to Investopedia is “a method of evaluating a security in an attempt to assess its intrinsic value, by examining related economic, financial, and other qualitative and quantitative factors.”
     • Technical Analysis is, according to StockCharts is “the forecasting of future financial price movements based on an examination of past price movements.”
   • Note: you may be overwhelmed with all these new information, which is why you need to practice and this points to our second tip…

2. Practice: Choose and Use Charts.

   
   • There is a number of charting websites that you can use. Choose a site with a paper trade view. It’s a simulation page wherein you can practice stock market trading without actually losing money. You will be trading with the stock’s real time value. Use it as your practice ground, while you enhance and choose which tools and indicators are the most effective for your trading personality.
   • Your own online broker website might have their own your charting page which you can use too. Whichever you choose, make sure that they have the tools you need in order to analyze the stocks properly.

3. Don’t Get Stuck in Paper Trade. Open an Online Broker Account ASAP.

   
   
   

   • The moment you feel that you’re ready to start putting your money in the stock market, open an online broker account immediately. This is necessary so you wouldn’t back out, once the overflowing information starts to overwhelm you. TIP: Once you figure a profitable system with minimal losses, you can immediately start investing in the stock market. Remember, your paper gains from your paper trade will never become real gains if you’ll be afraid to put real money into it. Believe in your system and take a leap.
   • Note: Make sure to review first all available online brokers in your country. Research their pros and cons. Choose one, open an account, and be familiar with its interface.

4. Make a Trading Journal

   
   • A trading journal is a tabulated data of all your trades. It includes the following data but not limited to: the stock code, number of shares, price you bought them, price you plan to sell them (both profit or cut loss), the kind of play or strategy you will use, and lastly the actual price you sold the stock. You may add additional data, which you think would be helpful for your trading personality. This journal will help you analyze all your trades, especially your losses so that you may minimize them in the future. After all, our goal is to increase profit.

5. Are You an Investor or a Trader?

   • With each buy and sell, ask yourself first on what are your plans for that specific stock. Decide before you buy, if you’ll be a trader or an investor. Use your knowledge on which will be a great fit for that stock. For example, a stock has a slow moving uptrend chart with strong fundamentals, and so you can choose to be either a swing trader or an investor. However, if a stock is stuck in a range, and its fundamentals are not good, then you can choose to be either a day or a swing trader through bounce play.
   • Whatever you decide, never change it in the middle of the trade. Write it down on your trading journal and stick to it. If for example you chose to be a trader for a certain stock and then you see that it has gone down and your cut loss signals were met, sell it immediately. This will help you prevent unnecessary losses such as time and money.

6. Be Psychologically Prepared.

   
   • The first time I switch from having an investor mindset to a trader, I had problems. I would find myself, literally watching the stocks from opening until closing. I thought It’s how traders do it, but I was wrong. It was exhausting. The reason why I was like that was because I wasn’t psychologically prepared yet. I was so afraid that I would lose my money. So, I closely monitored every movement of it and sold it the very instant it hit my cut loss price. I was wrong again. (Bonus TIP: don’t sell a stock through setting a certain cut loss price, set a cut loss system instead. If it didn’t follow certain indicators or tools, then sell).
   • What are the signs? When you win, you are overjoyed and too confident. You feel that you will never lose a trade again which is why you enter every credible trade without thorough studying. Another sign is, when you lose, you feel depressed and your confidence in your system diminishes. You tend to set a too tight cut loss system, which will only result to more losses.
   • If you feel that you’re experiencing the signs above, then you may take a pause and revert back to paper trade. However, only do this, if you’re confident enough that you will be able to return to actual trading. Use paper trade to re-enhance your system or build more confidence in it. As you became more confident in your system, the less emotion you will have when it comes to trading. This is better. This will help you become psychologically prepared when dealing with both losses and wins.

Keep in mind these 6 essential tips. We hope that it will help you, as you start your journey in the Stock Market. Remember that all stock market veteran traders and gurus started as a beginner. Don’t lose hope. You can do it too!

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