Playing the stock market has long ceased to be the occupation of professionals, and now it is also a way by which ordinary people can learn the art of investing. Despite the fact that investing in the stock market abounds in a lot of publications, the so-called golden mean to make a fortune has still not been discovered. What advice should beginners take to heart?
Table of Contents
Start with technical matters.
If you are asking yourself how to become a trader on the stock exchange,then you need to know that you will not start trading without an account with a broker. A stockbroker is an intermediary between you, the investor, and the stock exchange. The next step will be to deposit money in a brokerage account.
If you are wondering which broker to choose, then most stock brokers have a very similar offer. You can try your hand at the demo exchange, which allows you to play with virtual cash. Unfortunately, there is no such exchange simulator that would reproduce it accurately and completely.
The stock market, and psychological matters.
The right approach and psychology of investing will not teach you any course. In order to make money on the stock market effectively, you need to maintain the right attitude. There is an iron rule that should not be violated. When playing the stock market, invest only as many funds as you are able to lose.
The second principle says: practice makes perfect! Hence, it is worth to constantly learn. Bet on further education and on being up to date with market and financial matters. Without knowing these two rules, you will never become an effective trader in the stock market, because you simply will not know how to invest funds wisely and profitably.
In addition to psychology, it is very important to know about the game on the stock market. When you deal with changes in the value of assets, you will reflect on your decisions. Buy? Sell? Stop? Well, first of all, you need to keep your nerves in check and not get carried away by emotions!
Where to invest funds?
Address this question to yourself. If you already have a clearly defined goal, you know how much you want to earn and how much you can lose, then it will certainly be easier for you. Your decision to buy goods on the stock exchange is also based on technical and fundamental analysis.
Technical analysis is about predicting the price behavior of a stock based on the historical data on the chart.
Fundamental analysis is a kind of approach to stock market investments, where the decision to invest funds depends on the macroeconomic situation of the company and the figures that apply to it.
Against the background of these techniques, copy trading seems to be an interesting proposition, i.e. investing in such a way as a very experienced player, and colloquially speaking – copying it.
Although stock brokers are mainly associated with trading shares, this is not only their field of activity. They also have contracts, bonds from the Catalyst exchange, options and ETFs at their disposal.
Want to know more about these financial instruments? So you will have to be even more interested in the subject of stock market investments.
Why does the investor earn?
Playing on the stock market has basically only one goal, to gain as much money as possible. Stock market profit comes from two sources: profits from the sale of shares and dividends. Let's start with the action.
Investing in stock market shares is nothing more than buying at lower prices and then selling at a higher, profitable amount.
The dividend consists in sharing the company's capital with shareholders. The amount paid annually depends on the number of shares held and the sum of the dividend per share. A lot of investors learning the art of the stock market ask themselves:
"Should I sell the shares while their value has risen? Or maybe wait for the moment of payment of the dividend?"
How not to play the stock market?
Playing on the stock market is a constant broadening of horizons and constant training of the right attitude. You will certainly appreciate how much calm and caution count here. The basics of the stock market are not an unmanageable art, a lot depends on you. You will certainly come across situations where assets that were supposed to bring profit and earn for themselves will begin to lose value. Such moments are a test of your true skills.
Some investors with the right investment knowledge face multiple drops in their assets, but they don't sell them too quickly to minimize losses. They prefer to wait for the perfect moment, sometimes even for a very long time, to finally monetize their shares.
Another example of how not to act in the stock market is following the voice of the crowd. The general public is usually convinced of their infallibility, but reality quickly verifies this belief. After all, the majority does not have to be infallible, because the majority are not experts. These are maybe 5%. So if you listened to the voice of the public, then you could have made a very bad choice, and only blame yourself.
That's not all.
You probably think that you already know how to play the stock market. The bad news is no. You need to delve even deeper into the topic. However, do not think that this is an impossible task, because most people are able to explore the basics of the functioning of trading on the stock exchange. However, like any craft or art, it requires practice.
Do you already know what stock market you will be investing in and with what capital? It's all up to you, even favoring your happiness. Put yourself in a favorable position. Invest in the stock market, create a passive source of income.
Playing on the stock market will not do without trying different tactics, experiments and getting to know the industries of companies you want to have in your portfolio. The next step forward may be to go beyond the WSE and invest in other instruments on foreign stock exchanges? If at some point you find that you understand the basics of the functioning of the exchange, then start acting consistently. Profit in the stock market is not only about money.
Saving money is not easy.
I think you will agree with me that it is worth having as much savings as possible on your account. Certainly, because thanks to them you can realize your goals and dreams. These savings are the so-called financial cushion ensuring financial security for difficult times. It also allows you to protect yourself against random accidents.
Unfortunately, inflation quickly spoils the whole idea. Money set aside in the account generates a loss, because with time its value decreases. And yet, if they were well invested, they would bring a lot of income. It is true that you can put them on a savings account or deposit. Yes, it's true. However, due to low interest rates, this has ceased to be profitable. Banks have such offers, maybe even advertise them, but the percentage of profit is so low that it seems natural to look for other ways of saving.
In this case, more and more people look at the stock market,not only as a way to earn, but also to multiply their savings.
Multiplying savings on the stock exchange.
As written above, the stock market is a good opportunity to multiply financial resources. However, beginners will certainly ask:
"what do I have to invest in the stock market to make a real profit"?
There is no doubt that stock quotes are constantly changing. Due to their dynamism, you can not immediately set yourself up for huge benefits. Despite this, one cannot treat knowledge about the stock market as knowledge for the "chosen". Stock market analysis can be learned, and it is not said that this is the skill of great Wall Street investors. The Polish Stock Exchange is open to all investors.
The condition for starting a stock market game is to have even a small number of savings in order to invest. Who knows how much they will be multiplied one day?
Which companies to focus on at the beginning? Such a decision should be thoroughly rethinked in order to minimize the risk. The first weeks should be served by observing WIG20 – a list of the 20 largest companies listed on the WSE. Some of them belong to state-owned companies, so you can assume a certain level of their security. This can be a good choice for beginners, because they will not cause a sudden loss of invested funds, although as a result, profits will also not be among the highest.
Or maybe an investment in currencies or in raw materials?
The investment exchange is not limited to companies, allowing you to buy their shares, as well as sell them. Another possibility facing the investor is to multiply capital on currency exchanges. Currency exchanges offer, as the name suggests, access to currencies from around the world for the purpose of trading their rates.
To undertake this type of investment, you need to have knowledge of currencies and the geopolitical situation affecting the state of exchanges and our portfolios. These types of financial operations are fraught with huge risks, you need to be aware of how much fluctuations are subjected to the rates. One day you can strive for wealth, and the next day will lead you to the financial bottom.
The topic of currencies would not be complete if we did not mention cryptocurrencies. They are becoming more and more popular, although as in the case of traditional money, you have to take into account the risk associated with market volatility.
People who do not like stocks or currencies may like the bullion and commodity exchanges. Investing in gold is, according to some experts, the right decision. Well, provided that the current price of bullion on the stock exchange encourages you to buy. Gold has always been used to secure transactions, and the strength of the state depended on its amount in the treasury.
Someone who considers gold to be a relic of times goneby, maybe he should invest in oil? She also has her place in the stock market and allows you to earn with her participation.
The road to success.
Unfortunately, the only right way to achieve success does not exist. However, we know what a good investor should do to get closer to the expected profit. First of all, it is necessary to follow the analyzes and forecasts of the stock market. Stock market analysts, using their experience, often share predictions, for example, on stock exchange forums.
Using this type of advice will significantly increase the chances of good investments. Forecasts made by professionals can tell us how much the company's price may be for a certain period of time. Keeping track of daily stock market commentary will allow you to react to ever-changing stock rates. Knowledge of good analyses delivered by professionals is the basis of every person who wants to deal with the stock exchange. Especially we are talking about beginners here. Such people should focus on absorbing valuable knowledge from different sides.