8 Stock Trading Tips Coming From A Beginner

It’s an exciting time to take a chance on the stock market. Can you imagine turning $1,000 into $3,000? In a time where the markets are low like right now, there’s so much opportunity for lots of people to get rich. The economy is declining and fear of the corona-virus is at every corner, affecting employees, businesses, and ultimately the stock market.

In 2016, I inserted $2,000 into the stock market and ended up losing about $400 because of poor rookie mistakes. Mistakes that were avoidable, but not obvious to my 18-year-old self. My goal is to share 8 major components of stock trading that it takes to offer new investors some guidance.

1. Assume you’ve already lost it all.

Did you put in $20, 50, or $500? The amount doesn’t matter. Just assume you’ve already lost it all. Wrap it around your head so that you won’t ever see it again. Doing so will take away a lot of unnecessary stress so that you are able to focus on your portfolio and how to make it stronger.

The stock market is a gamble. You will have some winners and you’ll have some losers. In simpler terms, do not risk more money than you are willing to lose.

2. Define your financial goal

What is your financial goal? Extra money for retirement? Is it to make an extra hundred or thousand dollars? The choice is yours. If you can manage to be aware of the kind of stock trader you want to be will help you to have more success.

3. Study the 5-year graph of a particular stock you are considering

In order to gauge a better understanding of the company you plan on investing in, check out the price movement of the stock over the past 5 years. Is it an upward slope or a downward one? Has the stock been stagnant, showing little growth and small gains? Earnings reports offer plenty of value about your company as well. It’s a good sign when the earnings reports are going up throughout the year.

4. Follow the news

Staying up to date on the current events between your company and the market will be critical to how long you hold onto your shares. The news can also help you decide when you want to buy and sell. Significant examples include the company laying off 15% of its employees, closing down production plants, merging with another company, budget cuts, or health outbreaks.

5. Short or Long Term Play?

How long do you plan on waiting on your stock before you sell? Do you want to play the long term game and wait for the market as a whole raise five to ten years from now? Or do you want to make a quick profit when the value spikes upward suddenly?

The people who jumped into apple stocks when they were less than a dollar (67 cents in 1997), would have shares that are worth more than 100 times their investment were they to sell today. Patience has a huge payoff sometimes.

6. Dividends

Some companies offer what are called dividends. Dividends are a sum of money paid regularly (usually annually) by a company to its shareholders typically out of its profits or reserves.

When researching a stock, you can observe the dividend yield the company offers and decide if you like it. Stock dividends I’ve seen have ranged from 2% to 27% of the current stock price. For example, 10 shares multiplied by the current price multiplied by the dividend yield percentage will give you your payout.

An option you can choose with your dividend payout is to make it a “DRIP” ( a dividend reinvestment plan). DRIP automatically reinvests those dividends into additional shares of the same stock, instead of just adding cash to your brokerage account.

7. Dollar-Cost Averaging

Buy low and sell high has always been the simple formula for making gains within the stock market. Dollar-cost averaging is when you buy, for example, 5 shares of a $10 stock, and one week later it drops to $9.00. In order to decrease your losses and raise your potential gains, you would then buy 5 more shares at the $9.00 price. Doing so gives you 5 $10 shares and 5 $9.00 shares. Combine those together and you have an average share price of $9.50.

Assuming your stock rises upwards in the coming weeks, you will be more profitable. But if it consistently drops as we have seen in the COVID-19 health scare, you would continue to buy should it drop or get out if you sense bankruptcy.

8. Have fun!

Most importantly, remember to have fun. Yes, you are juggling your real, hard-earned money, but if you refer back to #1 you shouldn’t let it eat you alive. With any money moves, there is a gamble. You may win some and you may lose some, but there will also be times where the markets plummet and it will be tough to watch.

Remember these tricks when investing and you will not make as many mistakes as others do going into this game cold.

Best of luck. Stay safe, and trade strong!