Top Five Guidelines for Stock Trading

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Who should invest in the stock market? It may seem strange, but in fact, everyone can invest in the stock market. We are not saying that the stock market is a game; on the contrary, even if, unfortunately, the saying has spread to play on the stock market.

The fact that it is an investment implies some fundamental concepts:

  • It takes specific preparation
  • You have to use the right tools
  • It takes time and effort

Learn to invest in the stock market- top 5 guidelines

Before starting to invest, it is therefore good to learn. Unfortunately, many aspiring traders start trading without even knowing what financial trading is. These people quickly lose all their capital; luckily, you can start investing with just 10 Euros.

1. Tools for investing in the stock market

To invest in the stock market without suffering scams and scams, the broker must be carefully selected. First, it must be strictly authorized and regulated by a regulatory body based in a European country.

These brokers are then further approved by the country’s stock market governing bodies, which register the regulate the stock market. In this way, the investor has the mathematical certainty that he will not suffer scams or scams. On the other hand, choosing an unauthorized broker is really dangerous because there is no one who controls and guarantees honesty.

Another important factor in selecting a broker to invest in the stock market is convenience: there should be no commissions. The best brokers earn exclusively thanks to a small spread, i.e., a difference between the price at which it is possible to sell and what it is possible to buy.

Finally, the broker you decide to use should have a very intuitive and user-friendly interface. This aspect is especially important for starting a business.

Wasting time and energy trying to understand how a futures trading, interface works is definitely not a good investment.

2. Success on the stock market: commitment and determination

Anyone who wants to be successful with the stock market must be committed, must dedicate time, and must be determined. Surrendering at the first difficulty is the best way to fail quickly. The good trader fully believes in what he does and knows that when you invest in the stock market, you can also lose money. But it is not a drama. Of course, we must always deal with these issues, and we must avoid investing money in the stock market that we cannot afford to lose.

3. Carefully choose your investment portfolio

Always invest only the money you are willing to lose and make sure you can afford it. Equities can depreciate a lot and quickly. While an investment may seem smart and have good prospects for earnings, there is always the possibility that it can go wrong. Invest only in stocks and never trade options and derivatives. They are speculative financial instruments, not investment ones. Conversely, the use of options and derivatives will expose you to a greater risk of loss. Do not invest in stocks that have had a modest return and are low priced. The fact that a stock that was worth € 100 is now worth € 1 does not guarantee that it cannot depreciate further. Remember that, as history has already shown, a stock’s value can go as low as 0. It is essential to hold an optimum and diversified portfolio of assets to minimize the risk and maximize the returns.

4. Don’t buy stocks on the sidelines 

In short periods of time, the price of the shares can change widely without notice. If so, using leverage can clear your investment account in moments. Scenarios where the price of a stock loses 50% of its value, zeroing an account, and then “bouncing” to the initial price are very common, so don’t use leverage. Buying shares using this tool is mere speculation and not an investment.

5. Do not focus your operations on day-trading, speculation, or those operations that promise a short-term profit

 Remember that the greater the number of transactions performed, the greater the commissions you will have to pay to your intermediary, negatively affecting your profits. Compared to long-term gains, gains from short-term transactions are also taxed much more heavily. Mainly short-term (daily) trading is to be avoided because it requires considerable experience of the financial world, extensive knowledge, and a lot of courage (as well as a large dose of luck). In other words, it is an investment method not suitable for beginners.

Warnings

·         When it comes to money, people often lie out of pride. When someone offers you advice, remember that it’s just an opinion.

·         Do not use technical analysis because it deals with strategies used by speculators and not by investors. There has been a long and bitter debate about its effectiveness.

·         Don’t try to predict the market trend. Predicting exactly when security will reach its minimum or maximum value is impossible. If someone claims they can, they are most likely lying.

·         When you decide to invest, do not blindly trust the suggestions of others, especially if they come from those who could profit from your operations. Be cautious about following the advice of brokers, financial advisors, and market analysts.

·         Do not execute operations on the basis of “momentum investing,” that are, buying those stocks that have given excellent profits in the last period. In addition to being a technique that does not always work, it is pure speculation and not an investment. To dispel any doubts, ask a few questions of those who used this strategy to invest in the stock of tech companies at the turn of the last century.

·         Don’t get involved in insider trading. Making an investment exploiting confidential financial information before it is made public is a crime punishable by law. No matter how many profits you might make from such an operation, they will in no way counterbalance the legal problems you may face.

Conclusion: The stock market is not a game; to be able to be successful, you must always keep in mind that it is a real investment.

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