iStock Blog

If you’re just starting out, then the stock market probably seems like an alien world filled with confusing and often contradictory information.   A beginner is especially vulnerable because they don’t know the rules of the market, they don’t know how it works or why it works the way it does.  And there are too many choices.

Here are 5 important tips to help you get started:

You need to have the proper tools, skills and knowledge in place BEFORE you ever buy a stock.

1. Tools: You will need a computer with access to the Internet as most people nowadays trade or invest via an on-line broker.  The fees are much lower and you usually get a better “execution” order price on your purchase. You will also need a charting software program to study stock charts.  It is no longer enough to follow fundamentals, you need both fundamental and technical analysis to succeed in today’s stock market.  So, the tools you need are:  a computer, an on-line broker, and a charting program.

2. Skills: You will need to learn how to read charts.  This is essential to all kinds of investing and trading.  The easiest to read are called “candlestick” as they show price fluctuations in a graphic format.  You need to learn market terminology and how orders are processed.  You also need to be able to assess your risk for each stock purchase. In other words: you need to acquire the skills to use the on-line broker correctly, and how to use the computer charting program for analysis and for finding stocks quickly.

3. Knowledge:  Most beginners rush out and buy the first stock someone recommends which is the WORST way to buy a stock.  This almost always will result in either a loss or a very disappointing return on your investment.  That is because the market is dominated by the “institutional investor” who buys huge share lots and frequently sells whenever there is news on a stock, taking profits.  Before you buy any stock, you need to get to know that stock by studying its chart, and do what is called “technical analysis,” and you need to get to know the company by studying or researching the key fundamentals.

4. Trading Style: Once you have learned the skills and tools, you need to decide whether to invest long term, trade for short term income, or both.  The new tax laws recognize an individual trader as a person doing business trading stocks for profit.  This makes the profits from your trading ordinary business income rather than capital gains and they are taxed accordingly.

5. Risk Control:  Which is how to protect profits with “stop losses” and how you protect profits with a “trailing profit stop.”  Stop losses are a trader’s best friend and protect them from catastrophic losses.

This site is setup to help you better educate yourself before investing in the market. You shall not however, base your investment strategy on what you’ve read here. We are not liable for your investment decisions.

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