While I am not the biggest trader on earth, I still like to pick some stocks once in a while. I started trading in 2003 and for 3 years in a row, everything I touched was turning into gold. I must say it was the worst way to start trading; being in a heavy bull market. I only learned something about trading this year where things turn out to not be pink anymore. This is why I am trying to go back to the basic and relearn how to trade. So here is an easy 4 steps method to start trading.
Before starting to even think about buying stocks, an individual should start reading about finance, economics and stock market for a while. When I started, I used to read financial news for an hour a day. Then, I subscribed to a finance newspaper that comes one a week. You must understand what is going on in the financial jungle before you start to walk into it. If you don’t do so, lions and other creatures are waiting for you and the party will be on their side!
Once you have a good habit of reading about finance on a daily basis and you start enjoying it, you have to observe other people’s reaction to financial news. When I am talking about people’s reaction, I am talking about newspaper, financial analyst and portfolio manager. Look at how they understand the same information that you both receive. For example, think about what you would do back in 2000 during the techno bubble as Warren Buffet was saying that he did not invest in any techno stock… Some people seem to have a 6th sense and they don’t see dead people with it, they see dead stocks 😉
Once you are aware of what is going on and you take note on how people react, it is time to make your own analysis. Think about what you see and what you read and try to make links between everything. This is not an easy tasks, but making links between events will open the door a successful trading history.
Now that you feel comfortable with the financial terms, strategies and thinking, it is time for you to build a fake portfolio. You can go on Yahoo! Finance or Market Watch in order to create a fake online portfolio. The basic service offered is free and it will be a learning experience as you can trade with real quotes and see if you are finally ready for the real thing. Before you open your account, please note that it is always easy to lose 5K of virtual money, it is something else when you are actually losing money from your own pocket!
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