A stock trader should have a few specific features that will help him teach trading from scratch. Not ingiating them can be a difficult problem to go through. Most likely, stock market investments are not suitable for you. Find out why.
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You are a total beginner.
Playing the stock market with real money will require you to know the fundamentals of the market, and preferably have the right trading strategy and risk management plan.
If you have neither knowledge nor experience in trading, give yourself some time to start trading cryptocurrencies and Forex. Their price volatility and manipulation make them instruments from the so-called high-risk group.
You take failures to yourself.
Trading requires you to control your emotions. The lack of ability to keep them in check leads to ill-considered decisions and the desire to make up for losses as soon as possible. If you want to deal with extreme scalping with a few minutes of transactions, then check the statistics of your account.
One of the symptoms of uncontrolling your emotions is a large number of transactions carried out during the day. Very characteristic are those carried out in opposite directions and on one instrument. Approach the stock market game calmly. Be sure what you are looking for and open positions in the direction of a specific trend. If you are at the beginning of the road, make one transaction a day and support it with solid arguments.
You are afraid of losses.
A stock market investor who is terrified of losses is like a boxer who is afraid of blows. Failure is an inseparable part of the stock market and business. Running a store and selling a product, you are not entirely sure whether you will sell it. The return on investment is associated with a certain probability. In the event of a loss, it should be included in the cost of the entire business.
The point here is not not to lose, but to make the profits greater than the losses.
You want to make a quick profit on the stock market.
Fast stock market earnings are just a myth. It is spread by people who prey on the money of novice investors and offer them dubious quality odds. If you do not want to analyze charts and devote time to education, then playing the stock market will only hurt yourself. Treat making money as a side effect of reasonable trading. His process should interest you, please you and lead to satisfaction. Without such an approach, your success is rather doubtful.
You don't know how economics works.
This is especially important for long-term investors, e.g. trading shares on the stock exchange. In addition to knowing the basic concepts, you need to know what a given company does, who is its competitor and what its price will depend on. You need to check and observe each transaction. About the scheme "buy and forget" you can… forget.
You look for certainty in other people's words.
In the stock market, the more you stand out from the general public, the better. Every time you exchange your knowledge with the community that there may be people behind it who are not suitable for trading on the stock exchange.
You can talk about real happiness when you come across a group of people who know what they are doing and learn from their mistakes. In other cases, take the opinion of others with a slight grain of salt,although do not go to extremes and do not be ignorant.
Leave Forex alone.
Most of the popular Forex pairs are characterized by quite low volatility. Beginners may feel encouraged to see the narrow space of the course and think about the stability of the instrument.
Reality shows that starting the adventure with investing should take place away from currency pairs. There is a lot of manipulation there, also during day trading. The level of complexity of the markets means that beginners will not find themselves in long-term trading.
The prices of each Forex pair depend to varying degrees on the prices of the others and are extremely sensitive to news from the world of economics.
US30 Wall Street and gold.
It's the Dow Jonesindex, an American industrial index that you shouldn't invest in when you're a beginner. Due to the relative mobility of this instrument, avoid it with a wide arc! It may allow for more opportunities to earn, but on the other hand, it creates the risk of a large capital squeeze with mismatched risk control.
Gold is associated with similar volatility as in the case of the Dow Jones. Scalpers and short-term traders liked this instrument because of its low spreads. Gold volatility may be an advantage for some as in the case of the Dow Jones index, but for beginners it is too risky. Hence, beginners should approach gold with great caution.
Dangerous cryptocurrencies and binary options.
You have no experience trading on high volatility instruments? Is the market mechanism a mystery to you? Avoid token markets with a wide arc. Cryptocurrencies are harder to master than Forex, especially when it comes to long-term trading. Currency pairs of traditional money are closely related to the state of the world economy, while cryptocurrencies exist outside the traditional system and are an ideal environment whose exchange rate is manipulated by various institutions.
Binary options — this type of trading has been banned in many countries of the world. However, such a kind of bookmaker in the world of the stock market due to its simplicity look like an interesting opportunity to multiply wealth.
Despite this, in practice they are very difficult to master by ordinary traders. Without being interested in mathematics and statistical analysis, you'd better run away from these kinds of markets.
Risky day trading.
A characteristic feature of day trading is the relatively high frequency of opened positions. If you are just starting your adventure with the stock market, this type of trading will require you to make quick decisions. Think about whether you are able to think about your next move in a short time? Regardless of the instrument you choose as the subject of trading, avoid this type of trading. However, if you decide to trade daily, then at the beginning limit the number of opened positions to a minimum.
What can beginners decide on?
In the case of stocks of listed companies, you may get lost in leverage, however, this can be good news for beginners. They will be protected from taking too much risk. Comparing the market to Forex, the mechanisms behind stock prices are more understandable.
Do you want to combine high volatility with the transparency typical of the stock market of listed companies? You can choose a popular company, e.g. Tesla. If you want to trade in the evenings, you may have a problem because the stock markets are open at certain time intervals.
A few words more about cryptocurrencies.
Cryptocurrencies, along with Bitcoin in recent years, have become a desirable means of the investment world. The voice of the crowd says – invest! You will probably notice that many people who have little idea about finance follow his voice and invest money in virtual money. Such popularity is an ideal manipulative environment. Many people are not aware of the huge price fluctuations, and some of them do not understand the operation of cryptocurrencies themselves at all.
If you decide that you are completely unfussed with blockchain technology and do not agree to high risk, then give up, or learn and only then invest in cryptocurrencies.
You want to make a quick profit.
If you want to follow in the footsteps of the crowd, invest in a company in which everyone invests, and without knowing the reasons for further growth, you are on a straight path to losing funds. If this has already happened, it means that you have run out of reason.
Situations of sudden price increases on cryptocurrencies are everyday life. The invisible hand of the market uses human greed probably every day. I'm sorry to disappoint you. On the stock market, you do not have the ability to multiply money quickly. Do you express yourself opening a business, earning in 1 day and closing it?
You invest money whose loss will hit you on your wallet.
You shouldn't invest money you can't lose. Nowhere! Neither on the stock market nor invest in cryptocurrencies. Trading for savings or horror, for borrowed money is a nasty idea. Once you're building a promising strategy, you'll feel so much psychological pressure that you won't be able to rationally invest your funds.
You don't know what leverage is all about.
Beginners often invest funds in Bitcoin, assuming that it is a safe investment, and to lose money the price would have to fall to zero. This absurd mistake is made by people who do not understand how leverage works. Depending on it, as well as the size of the open trade, you can lead to the loss of all invested funds with a movement of 0.1% of the price of the instrument.
Blockchain technology is black magic for you.
Investing in cryptocurrencies does not require you to know inside out, but it is worth having any idea about them. Before investing in blockchain-based currencies, master at least the basics. Before that, postpone investments in time.
You are not aware of the volatility of cryptocurrency prices.
Do you remember how a few years ago the price of Bitcoin fell by almost a third during the day? When you invest in altcoins, price fluctuations can be even greater. Perhaps it is worth following in the footsteps of Warren Buffet and not investing funds in digital money? And if anything, maybe diversify your portfolio and invest in a few reasonably stable instruments.
The impact of relevant information from the world of economy.
When trading on a daily basis, economic information does not play as much of a role as in the case of long-term investments. Still, regardless of the type of trading, every stock market investor should be familiar with the economic calendar and know how the latest news affects the market.
- The unemployment rate index published by the world's largest economies. The lower the indicator, the more the currency strengthens.
- GDP — strongly correlates with the currency of a given country. Strong growth in Gross Domestic Product strengthens the currency.
The retail sales indicator is recognized as one of the most important macroeconomic indicators. Confident consumers generate increased demand for goods, which has an impact on the increased number of transactions. This indicator helps in determining the increases or decreases in GDP.
On the stock market, be guided by simple rules.
Never blindly follow the crowd. A fraction of the crowd can actually make money from price increases, but most people will end up doing it like a speeding herd of lemmings. Organized actions are usually the deliberate intention of financial institutions to achieve their own goals.
The stock market is also not a slot machine with a game. Many stock market investors are counting on a shot that will multiply their funds many times. Maybe it would just be better for them to invest a shuttlecock? Draws are frequent and do not require a relatively large amount of money.