What does it take to be a trader?
Trading is like many other occupations and talents. It takes training and experience. However, the decisions on what stocks to trade, and when to enter and exit trades are the sole responsibility of the trader.
If you want to lose your money really quickly, then jump right in and buy some shares with nice sounding names. Alternatively, you could take your time to read up on how all this ‘online share dealing’ business actually works. And then there is the small issue of selecting the right shares to buy.
Firstly, if I were to start again now I would start by registering with one of the many online trading simulators. You get an imaginary £100,000 to throw at any shares you like with the peace of mind of knowing that it’s not real cash.
Then spend time just watching the price movements while you research each company. That is to say, what sector they are in and is that particular sectors general movement in an upward or downward trend. Look at the companies share movement chart, usually given intraday, weekly, 3 / 6 / monthly, 1 year & beyond. It can give an indication of its future direction, but by no means guarantees a definite projection.
Read up on the official company news on their website, with most listed companies they will have a webpage dedicated to investors with a host of information from company accounts to who’s on the board of directors. Checking the back ground of directors, especially the CEO, can give you a good idea of how well a company is being run by present & past successes. What’s the company’s strategy, where are they heading ? Ask questions as if you were going to buy the company because affectively you are buying a piece of it & you want it to succeed to make you money.
It’s not essential, but buy shares in an industry you know well. If you worked in or have interests in telecoms, electronics or the oil industry for instance then you are far more familiar with that than say hospitality or the building industry. It makes sense to follow what you know and have direct interests in. That is not to say you can’t research sectors in the business sections of the newspapers or online business news sites. But it helps to have some prior knowledge of sectors you want to get involved in.
Beware the BB’s, bulletin boards are great for chatting to fellow private investors. You can glean a lot from what people post on a particular board about how a company is performing. You can find out what some of the technical jargon is about. Some posters will be happy to help out with technical questions, but it’s worth checking out Investopedia.com for all your technical trading questions & glossary. One thing to watch out for are posters opinions. Never buy or sell a share on the word of a poster. Some posters work on panicing newbies & other investors to sell to send a price down or ‘ramp’ a price up. Quite often working in groups and come across as genuin everyday traders. Just be aware, they do exist.
Books are another great way to learn about the stock market & trading. I read the Naked Trader by Robbie Burns, a starter book. You can even email him with questions…and he emails back! Plenty of books to choose from, from Warren Buffet autobiography to Shares Made Simple, a good insight into the world of share trading.
Hopefully this might be enough to get a complete novice started. There is so much information available out there on the net you can spend days trawling through it. Head for the links page where you will find sites I use on a regular basis.
No-doubt eager to get started, so check out the Financial Trading section.