Trading on the stock market is a tough gig, with many who don’t make the right calls and fail to become profitable as a result. Every great investor started somewhere, learning from the advice of others and those who came before them. Thanks to the Internet, you have unprecedented access to news and information, all of which can make you a better trader.
That’s how you found yourself here, where we have three simple steps you can use to take your investing to the next level. While you’ll still have a way to go if you want to make a living trading stock, you’ll be in a great position to gain much-needed experience and work towards your long-term investment goals.
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1: Have The Right Attitude
First, you need to cultivate the right attitude when investing. Success in investing isn’t determined by things like IQ or how well you can do the math. Instead, persistence, patience, and lack of emotional decision-making are more important.
Make decisions with your head, not your guts or your heart. Your gut may be right in some cases but it’s not a substitute for an investment strategy, especially when you’ll lose any profits on the next flight of fancy that turns into a loss. Consider using impartial tools like LevelFields AI that can analyze stock data and predict patterns without the emotional attachment that you’ll have. This can help you make more informed decisions.
Similarly, you should remember that there is a company behind every stock ticker and that buying stock isn’t about choosing a random combination of letters. By buying shares, you become part of the company’s ownership, which comes with an industry, competitors, notable executives, and quarterly earnings reports.
You should analyze your investment considerations carefully using the resources available to you. It helps to invest in companies that you care about, if they are solid, as you would like to research them.
There are many methods of analysis. Some focus on internal company/industry mechanics, others trade on news, some rely on graphs and technical analysis of the stock’s price movement, and some do all the above.
2: Build Positions Slowly
Most investment strategies make use of time, not timing. Many new traders think so much about finding the right opportunities, seeking short-term investments that they quickly fall out of love with.
For most investors, who aren’t day-traders but are regular people that keep investment portfolios, they build up positions gradually. Once you have identified companies that you have faith in, you keep hold of shares until they pay off or something happens that shakes your confidence.
This takes patience, naturally. Fortunately, you can use these strategies to build up your position:
- Dollar-Cost Averaging
Dollar-cost averaging is where an investor sets aside money and, at regular intervals, pays into a position every week or month. This builds the position slowly and so, while the price will fluctuate, it should average out.
- Buying In Thirds
Dollar-cost averaging is similar to buying in thirds but instead, you divide your cash by three and pick three points that you’ll buy shares. The intervals can be as close together or far apart as you want, depending on your cash and the company you’re investing in.
- Buy The Basket
Buying the basket, as it’s called, is just where you buy into many stocks. Instead of sinking your investing money into one stock and hoping for the best, you invest a little in all of the companies that meet your standard and wait. Over time, some of them should run and any wins should offset any losses unless you accidentally invest in a doomed venture (but that’s why analysis is so important!)
3: Have An Exit Strategy
When your investments pay off, you’ll need to exit your position to realize your gains and turn them into cold, hard cash. But of course, there is always the worry – what if the stock pops off next week? You should sell whenever you want to – it’s that simple.
If your investment is time-sensitive, where you want to see a change in the company before a certain date, then you should reassess the company and leave if nothing changes in your favor.
Many exit strategies make use of technical analysis and use tools like stop-loss orders to avoid losing too much money in investments. These are better for shorter-term investments or for basket portfolios that are full of stocks.
Conclusion
With these three steps, you can become a better investor and make better trades. They are not guarantees for success, however, as that still depends on your investment attitude, the companies you choose, and the decisions you make.
