In an environment dominated by very low-interest rates, the stock markets continue to be one of the main areas where money continue to flow. Now that technology and the opening of the financial system enable any individual to invest, there’s growing interest from retail traders to find a way to get involved.
Like with any endeavor, trading stocks and shares is a skill-based activity that takes time to master. Since there any ways to invest in stocks, including CFDs, futures, options, and others, we should clarify a few things from the very start.
Education on top of everything
If you want to start trading stocks, you should be able to understand some important financial and accounting terms. Even though you plan on using technical methods to find opportunities, you must be able to read and understand a company’s balance sheet, what it a stock multiple, EPS R&D, total revenue, operating margin, etc.
The first thing you must do is to grab a few books on the matter, or if you’re not a fan of reading, go on Youtube and search forrelated channels, in order to be able to understand all the notions that are required to trade stocks.
The importance of having a portfolio
No matter how good your strategy will be, you won’t be able to anticipate the market moves 100% of the time. That’s why building a portfolio is a very important aspect. This is another aspect that most stock traders get wrong. It happens because they build a portfolio with stocks that have a relativelyhigh positive correlation.
The overall value goes up when the market is bullish and they lose money when the market is bearish. One of the most important aspects when building a portfolio is to choose uncorrelated assets. Luckily, there are many ways to trade stocks. Sticking to traditional shares may be a bad choice, so instead you could make a portfolio of physical shares and then use CFDs, for example, in order to hedge your holdings.
Building a long-term plan
Trading stocks should be like a long-term journey, so even if you are at the beginning, start working on a long-term plan. You want to invest your own money forever, or you want to start managing funds? How do you want to constantly develop your stock trading strategy? What other things should be done in order to have consistent results? Think about these issues, and draw a step-by-step plan to solve them.