Stock trading is a high risk, high reward business. This is represented in the losses that most new traders make – CNBC reports that up to 85% of new traders will under perform in their first year, making a loss across their entire investment portfolio. While many traders have got lucky, many others have not, and the huge institutional investors that are often highlighted as examples to follow have benefited from consistency. Applying a stock strategy is the key, and establishing what that strategy should look like can be helped using a few key principles.
Use good tech
Technology has made huge waves in the stock market by allowing unprecedented numbers of retail traders to get involved with the stock market. This technology can have a transformative effect on your personal trading. At the core of this a stock scanner. There are plenty of options, including Stock Rover, Trade Ideas, TradingView, and Scanz. Features are key: for example, one Scanz review highlights the level of notifications available, which can be crucial on short-term high turnover trades, and important when starting out and looking to make quick wins. Indeed, Forbes have highlighted the impact of technology as defining the current market – just as Bloomberg terminals did the old. Conducting thorough research into how tech can help to enable your strategy is important.
Pick a market
Just as technology can help inform your trades, research can help to point you to the right market to join. The Balance recommend picking one area and only trading within it – at least at first. This is crucial for two reasons. Firstly, trying to get involved in multiple different markets will dilute your ability to conduct market research and learn about the products and businesses involved. Secondly, it will help you to identify where you can afford to trade. Insurance is an area that you may want to stay clear of – the average stock price within it can be very high. Conversely, auto manufacturers and broadcasting typically have cheaper prices that can be easier to work with while your capital is limited.
Stick to the strategy
This is something that traders have heard hundreds of times before, but it really does matter. Stock market investment is as much about strategy as it is research, and chopping and changing strategy frequently is often a recipe for disaster. Investopedia suggest the value trading as a relatively simple way to get in to the industry, and this focuses around the P/E ratio – if you’re starting out with this, stick to it for a while before developing. You need to understand the ins and outs of your strategy before looking to build on it or change how you operate.
Consistency is key in everything you do. Research high quality tech, pick a market you can afford to invest in, and stick to your strategy. Innovation can come later, but with consistency and calmness you can start to make headway today. The stock market is exciting and volatile, but it’s crucial not to get swept up in it.