10 steps to learn Stock Trading

So you want to learn stock trading do you? It will not be easy, but it can definitely be worth it. If you get good enough you might even quit your job and become a full time trader.

Well before you start imagining your big mansion and 30 sports cars parked in the front let’s talk about 10 steps you can take to get a good grasp on what stock trading actually is. But I got to warn you, if you aren’t willing to work at it a little you probably will not see much success.

1. Stop Listening to Others

The very First thing is to stop listening to others. Turn off the news and stop watching so called “professionals” tell you when and what to buy. That will not help you at all.

In case you haven’t noticed the news tends to be wrong, a lot, (except in bulls markets which is when everyone is a genius anyways). It also clouds your judgment. There is no use buying a stock for a short term trade and listening to someone else talk about why it is going to go down.

If you want to be a trader the first thing you have to learn is to step away from the herd and go off in your own direction. Scary I know, but worth it.

2. Learn Technical Analysis

If you really want to learn stock trading technical analysis is a must. There is no way around it, knowing what a company does and how much money they make may help you in a long term investment, but if your only in a stock for a few hours or a few days, that type of data isn’t going to help you much.

In the short term emotions rule! Stocks behave irrationally (at least from a fundamental standpoint) so you have to look at patterns that form in the price of a stock.

Technical Analysis is a whole other conversation in it of itself. It basically looks at things like support; resistance, chart patterns, and candlestick patterns to tell you were a stock is likely to head in the short term. Study it learn it, don’t forget it.

3. Buy Stock Market Books and Read them, Twice!

Books are wonderful things. If you want to learn anything it starts out in a book, so if you want to learn stock trading you have to start by buying books. The reason it pays to read stock market books isn’t because they are the answer to your problem (Ok most trading books do teach systems and strategies that can benefit you) but they allow you to think more like a trader.

Books like “how to make money in stocks” by Jessie Livermore and Trading for a living by Dr Alexander Elder get you started in the right direction.

4. Find Other Traders

Have you ever heard that your income is normally the average of your top 5 friends? Your friends rub off on you. Besides that trading is stressful, there are many times when you are going to need someone to talk too.

Maybe find someone else who is trying to learn stock trading and become “trading buddies”. Even if it is just some one online on facebook, you are going to need to talk to other traders now and then for advice and comfort.

5. Learn Some Advanced Strategies

There is much more to the stock market then just stocks. There are options and spreads. Even if you do not think you will ever want to invest in other “riskier” options it can’t harm you to learn them. You might even find that some of those “risky” strategies aren’t so risky after all.

There are many professional traders out there who find it hard to make money trading stocks, but find it much easier to profit from something like credit spreads.

6. Open A Paper Trading account

There is only so much you can actually learn by reading. If you want to learn stock trading at some point you are going to have to start trading. The great thing about paper trading accounts is that they allow you to practice what you learn and try new strategies without risking your own money.

You can use it to test new strategies and it will give you some idea of how you will do with real money. Just remember, it is much easier to paper trade then to trade real money.

When the money you are trading isn’t real it doesn’t affect you as much. You don’t get the highs of making money and you don’t get the lows of losing it.

7. Learn to Focus on Your Losses

I know most people focus only on winning. We all want to make the huge 200% returns from the market, but our first objective is to focus on our losses. Listen to Warren buffets first rule “don’t lose money” and his second rule is not to bad either “don’t forget rule number 1”

Trading is a business; our capital is the lifeblood of our business. If you lose your capital guess what? No more business.

8. Trade a System

Now where getting somewhere. Everyone who wants to learn stock trading wants to learn the “secret” system that will turn them into very wealthy people.

While having a system that works is a critical step to trading it is not the only step. The real secret to trading is you. Can you buy a stock when your system tells you to buy it? Can you buy it after your system has been wrong 4 or 5 times in a row?

Most people can’t trade. Not because they can’t find a system that works, working systems are a dime a dozen, every trading book gives off a couple.

What really makes a trader a trader is their ability to follow their rules and keep at it, even when times get tough. Believing in your trading approach is critical to your success.

Of course there is a difference between believing in your trading approach and trading a system that just doesn’t work. This is why things like back testing and papertrading are so important.

9. Learn to control your emotions

Emotions are powerful. Scratch that, emotions are very powerful. I have both seen them and experienced them myself. When you are winning and making money you feel like you are the smartest person on the planet.

When you are losing money you feel like you want to crawl in a hole and not come out until you have made it back. Somewhere in the middle is a line you have to stay within.

You have to know that there will be wins and losses. You have to be able to accept that and be happy knowing that you will make money on average.

If you can’t control your emotions it will affect both your trading and your personal life, and both are too important to jeopardize.

10. Open A Real Money Account

Ok, we all know that eventually, no matter what it is in life we have to take the training wheels off and get into it eventually.

So if you have been making money consistently in your papertrading account and feel you are ready to take the leap you might want to open up a real account with a real broker, after all paper money is great, but you can’t eat paper.

Just remember that a trader is never done learning. There are going to be many ups and downs, but sticking with it and learning is how you succeed at anything in life.

Of course there is no guarantee that you will learn stock trading (just like anything in life). But if you work hard at it and keep learning you put the odds on your side.

Top Of Learn Stock Trading