Stock Market Advice for Beginners
The stock market is no longer the playground of the rich and wealthy; it is becoming increasingly accessible and even those who only wish to dip their toe into the world of stocks and shares are now able to enjoy the benefits – and share the pain – of trading
The biggest mistake most beginners make is by placing too much money behind a single trade, a surefire way to bankruptcy. Even for a so-called `dead cert` it is a bad idea to place more than 2% of the available capital into the trade. That way, if the trade fails for whatever reason, there is still plenty of funds left in the account to bounce back from the failure. A mantra that many successful traders work to is `do not trade with cash that you can`t afford to lose`.
Those who have made significant amounts of money in the markets like to give the impression that they simply have a `feel` for the right investment, leading many novices to try and follow their example and trade according to their gut feel. In reality, very few successful traders place investments based on their instincts alone, as the human psyche is far too susceptible to be swayed by emotions such as greed and fear of failure to be a reliable tool.
The best way to trade is to devise a solid strategy, based upon tried and tested methods and agree prior to entering the market, when a deal will be closed and stick to it. Many investors have come unstuck by either pursuing a successful trade for too long or chasing a losing trade, throwing good money after bad.
It is also vital that a trader knows how to accept losses without it affecting his confidence or pride. Every trader, no matter how successful, regularly has losses but the trick to remaining profitable is closing the deal early enough, not waiting for the markets to turn in the right direction and not having too much at stake on any one trade.
Having decided to trade in the stock market, there are many different avenues to pursue, depending on the amount of money available and the length of time it is possible to leave it invested for.
Most people have heard of the FTSE 100 and this remains a popular choice, with the companies listed a familiar name in many cases, which can helps those new to investing.
However, those looking for a simple way to start investing could consider currency trading. Also known as forex, it dwarfs stocks and share dealing, is available around the clock and can provide returns even if the market is in a downturn, a considerable advantage given the current economic climate.