Best Ways to Trade Stocks

Unlike a salaried job – the financial reality that most of us are familiar with – there’s no guarantee of earning money with the stock market. There’s no security cushion, no ‘minimum wage,’ and not anything even resembling a way to insulate yourself from risks. While the stock market may be the place where fortunes are made, it’s often the place where money is lost, often by new investors.

It’s unfortunate, but it certainly happens. Brimming with enthusiasm and pocketing a small deposit to invest, a new stock market investor approaches the market without having done their research. A single stock buy happens and before you know it, it’s gone. They walk away with no enthusiasm, a shadow of the happy, enthusiastic, optimistic, and hard-working investor that they planned to be.

This story sounds like a tragic plot from a finance film, but it’s a reality that’s played out on stock markets throughout the world every day. Investors that lack experience or realistic expectations in the markets end up losing money, only to never return again. It’s a curse – negativity hits early, and as a result a promising trader ends up losing enthusiasm and hope, abandoning stock trader entirely.

Today, we’re going to look at how you can prevent this, and how you can learn the best ways to trade stocks in order to keep it from happening. Even as a newbie, it’s important that you learn a selection of the best ways to trade and hold stocks. This can help you keep trade fees down, keep your earnings up, and generate massive returns on your otherwise minute initial investments.

Let’s start with loss minimization, not just from your stocks, but from your trades. Working with a full-service stock broker can cost you a pretty penny, both in commissions and in the cost of doing business. Instead, it’s best to start with a discount stock broker. These are brokers that only deal in sales and stock purchases, and don’t offer any advice or information to their traders in any form.

The end result of this is that while you’ll gain less information, you’ll also end up with fewer fees associated with your trades. The vast majority of brokers can offer useful information, but it’s not information that can’t be found elsewhere. Trust in your own research, even as a beginner, and let your broker take care of transactions and stock management, not act as an unwanted advisor.

Here’s a second tip for improving your stock trading skills – start ignoring the ‘hot stock’ alerts you get pitched on so often. Many beginners make the mistake of subscribing to a stock newsletter and sticking rigidly to the advice that it offers. They buy stocks that are recommended, ignore all other options, and end up wondering why their ‘best picks’ ended up failing to perform, or losing money.

The reason, as you may expect, is that when these stocks are ‘highlighted’ by a newsletter, they are often flooded by other investors, pushing the price up and driving returns down. They’re also never great options in the first place. The best stocks are often hidden in the rough – ‘diamonds’, to speak. If a stock is highlighted in a newsletter, it’s unlikely to really be an undervalued, worthwhile stock.

Here’s another way to improve your stock trading abilities – invest as much time in research for all the stocks you buy as you invest in initial purchases. The biggest mistake many newbies make isn’t failing to invest at all, but rushing into the market without doing their research. Look at how a stock has performed historically before you buy, and even look into the company associated with it.

This will allow you to spot long-term trends that other investors will miss, giving you opportunities to profit where others won’t be there. The greatest returns on investment in the stock market rarely come from ‘big names’ and well-known companies. Instead, they come from smaller, lesser-known companies that have been deeply researched by the investors with large amounts of stock in them.

Let’s touch on one more effective stock trading point. It’s important that you don’t spread yourself too thin on the market, but it’s just as important not to become too focused. A deep focus on a few small companies could result in you losing all of your money if the market fails. Likewise, a wide focus can spread you so thin that you never see any real gains, purely due to your diverse portfolio.

Instead, find the comfortable midpoint, in which your investments are varied enough to insulate you from risk, yet still targeted enough to have the potential to produce big returns. This is where you want to be – right in the comfortable yet lucrative middle zone – as it allows you to both earn and protect your assets. These are both essential investment characteristics for new stock traders.

It’s always possible to improve the way you trade stocks, even with a refined and optimized process on your side. Constantly take notes of what’s working for you and what isn’t, and even monitor how a change in your process effects results. This is the type of analysis and change that can make you a top trader. Build your best way to trade stocks, and you’ll never see suboptimal results again.

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