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Trading 101: How to Become a Successful Investor,Buying Stocks

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Trading 101: How to Become a Successful Investor,Buying Stocks

Any experienced trader can tell you that buying stocks is a piece of cake. What’s hard is to find profitable stocks. Many newcomers prefer to use the so-called “copy trading” strategy, searching for the most successful traders and using their recommendations. Others try to find solutions in daily analysis of the market. You can combine strategies to receive positive results. The most important thing in the trading process is to notice the opportunity and not to miss it.

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If you still don’t have your own strategy, you can try these simple rules that may help you to gain money. Follow them, and after some time, you will create your own unique approach to the market. You can’t make money just by randomly buying different stocks you notice.

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Get rid of your nerves

If you can’t control your emotions, you may need to think carefully about your career in the stock market. The situation on the market changes so fast that it is impossible to control everything there. The best you can do is trust your guts, be patient enough, and keep a cool head no matter what you do there. Once you begin to panic, there is no turning back. You can put your money in jeopardy.

Warren Buffett, the head of Berkshire Hathaway, recommends putting your IQ level behind and trusting your guts more while investing. To do this, you need to learn everything possible about investments and the market. Once you do your homework, you can rely on your instincts on the market.

Check the companies you buy Stocks From

You have to know the name of the company you buy stocks from. Making investments automatically welcomes you in the company. Now you share the business and you have to be familiar with the situation inside it. Before you buy anything, read more about companies.

If you don’t have any insider information, you can check out quarterly reports. They are usually open to the public. Compare the last quarter with the same quarter from the last year. Check their two last annual reports. Read the information about plans for the future and the stats on employment. This will be enough for a start.

Backup plan

You need to have a backup plan in case everything goes wrong. Without the perfect plan of action during the panicky times, it is easy to have a heart attack and lose a fortune. The best way to stay alive after everything goes out of control is to have a journal or a personal diary with the companies and stocks you are ready to sacrifice. Make a list of pros and cons. Write down the lowest and highest price for each of them.

In this diary, you can also write down why you are buying particular stocks. Make a list. Underline the most important factors. After that, make a list of reasons that make you sell these stocks. It will help you to break up toxic relations with stocks you got too attached to.

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Take your time to buy stocks

Don’t rush with buying stocks. This is a long game. If you expect to see incredible dividends, you have to learn how to wait. They may not come for years. You can build a portfolio step by step. No one hurries you up. Pick one of these strategies:

  • Buying in thirds allows you to save your earnings, at least in parts. Decide how much you want to invest and divide the sum into three pieces. Pick the shares you want and buy them with intervals based on companies’ performances;
  • Dollar-cost minimal average is not complicated at all. You have to invest a specific sum of money at a regular interval. It can be one a week or once a month. This approach evens the price you are paying, even if you buy shares when the price goes down and less of them when it rises;
  • The “basket” buying helps you to make a decision about investments. If you can’t choose one particular company, you can try buying the basket of stocks. This way, you have guarantees that even if something goes wrong with some of the stocks, you still have others. After some time you may double the stocks of the particular company that reveals better results at the end of the quarter.

Don’t be too active

Stop checking the stocks every minute to not be carried away. The best time to do this is once in a quarter. Otherwise, you might start panicking during the short-term events, which may not be crucial for the total picture but can make you sell for a lower price.

Once you see that your stock is moving in the direction you don’t want, check out for the trigger. It is always about the company. Read the news and find out whether everything is alright there. If nothing has changed significantly, you don’t need to worry. If you believe that the event may affect your stocks in the future, act.

Common Mistakes to Avoid

Here is a detailed list of the mistakes you can avoid. They are common for newcomers. If you want to be a successful investor, try not to repeat them:

  • Misunderstanding investment. Unfortunately, this happens often. You have to understand the business model of the company you invest in;
  • Impatience. You have to learn patience to make long-term investments which usually turn out to be more profitable. Don’t panic when you see your stocks moving;
  • Getting too attached to the company. Love can be blind, so is your attachment to the company you are buying stocks from. Analyze their activity and financial reports as if you don’t know them or did not receive any profit from them in the past.

Be On-Time

Time and patience are what make you a successful investor. Learn these tips and build your own strategy before you invest anything. Once you learn the basics, you understand the market better. Make your moves without rushing and you will earn the profit you want.