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Basic Stock Trading Strategies for Beginners

Even Warren Buffett started somewhere. If you're new to stocks, these trading strategies for beginners won't steer you wrong.

By Cato ConroyPublished 6 years ago 6 min read
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Trading in the stock market is pretty intimidating, especially if you're new to investing in the stocks. All the numbers, new terms, and horror stories about major stock market crashes can make it feel like it's a "professionals only" zone.

However, stock marketing is something that everyone should do—and can do. Experts agree that you should try to start investing in your 20s, even if you aren't totally sure what you want to invest in.

Feeling a little lost is typical if you're new to investing. However, these easy-to-follow stock trading strategies for beginners can help you feel more knowledgeable and also get good returns.

One of the best stock trading strategies for beginners is to leave the trading up to a professionally managed, automated advisor. Robo-advisors, as they're known, are designed to manage people's investments to maximize their chances of meeting their financial goals.

A lot of the best robo-advisor apps will also give beginners better insight on how to trade stocks, what makes stock markets fluctuate, and more. This will help newbies learn about how to invest better, and why it pays to invest.

Don't try day trading right off the bat.

A lot of beginners hear great things about day trading, especially from people who claim to sell "systems" that teach you how to day trade and make "unlimited, guaranteed" income. Truth be told, day trading isn't easy and actually can be an easy way to end up broke.

None of the decent stock trading strategies for beginners would suggest trying day trading first. Before you want to give day trading a try, make a point of trying to invest for long-term goals. Once you feel comfortable with stocks, make a point of learning about day trading before you dive in.

Just like with any other form of investing, knowledge is power.

If you're giving stock trading a try for the first time, make sure that you have points at which you'd want to sell or cancel the trade in mind. You should have a point where you think profit is acceptable, and a point where you no longer feel comfortable keeping the stock.

A lot of newbie traders tend to think you have to buy and sell at the exact market price you're seeing at the time of the transaction. This isn't necessarily true. In fact, one of the biggest things to avoid on Robinhood and other trader apps is relying on market price to make your money.

When trading stocks, you can actually tell your online broker program to sell once a stock you're buying reaches a price you deem profitable enough to sell. Stock trading apps like Robinhood allow you to set Stop Loss orders that will sell off stock if it crashes too far for you to feel comfortable keeping them.

These kinds of basic stock trading strategies for beginners allow you to have a lowered level of risk, a way to profit without having to watch the stock market ticker like a hawk, and a lot more control on your portfolio.

As tempting as it may be, you should avoid watching your stock portfolio too heavily—even if you're a day trader.

This is one of the more counterintuitive stock trading strategies for beginners to learn, but trust us, it's important. Keeping too close an eye on your portfolio will make you feel very anxious, and that in turn can cause people to sell stocks at a loss.

When you get scared, you end up trading poorly and more willing to get a less-than-stellar profit on each trade you make. By setting limits and waiting things out, you are way more likely to get better profits.

Don't day trade with money you cannot afford to lose.

The risk of playing the stock market is the fact that you can lose everything. In day trading, this is doubly true, primarily when you're dealing with high volatility stocks. Many people who wanted to day trade found themselves broke during major crashes.

Risk needs to be managed, and that means that you don't let yourself risk more than you would feel comfortable losing. You should never bet savings you can't afford to lose on day trades. The more you need that money, the more conservative your investment route should be.

If you would be in a blind panic or would have to figure out how to afford food if you lost your money day trading, don't trade the cash you have. Put it into an emergency fund to keep you afloat if you need to keep your money that badly.

Choose a trade market and platform that works with your investing style and budget to bolster your ability to profit.

Every single trade market has advantages and disadvantages. As an investor, you should know what each market can offer you. Trying short-term stock trading, particularly if you want to open a day trader account, means that you will need to have a certain amount of money for your initial investment.

FOREX investing tends to have the smallest minimum investments amount, with many accounts starting as low as $500. Trading futures, on the other hand, can cost anywhere from $1,000 to $2,500. Each market has different qualities, and that will change the strategies you can use.

When you're trying to figure out stock trading strategies for beginners, remember to trade in a market that will actually work with your budget, time zone, and trading style reasonably well. This is also true about the platform you use. You have options when it comes to the way you choose to trade; find out what your options are before you jump in.

If you're casually doing stock trades, a fee-free online broker like Robinhood will allow you to start trading stocks without having to deal with minimum initial deposits that start in the $100-plus range.

Major stock strategy advisors will adamantly warn you against doing rapid fire trading right off the bat. This is because beginners often don't have a good strategy when they first decide to try to trade stocks for a profit... and that can cause serious financial losses.

A better idea would be to do practice investments on a fantasy trading platform. If you want to make sure you know what you're doing, don't bother trading real cash until you've mastered the trading strategies for beginners on a fantasy market.

Follow what the experts are saying, and educate yourself.

It's insane how many different groups want to help people get more information about trading are out there. Many of the best apps for beginner investors are actually tools that help you learn about stocks and how to trade them.

If you want to learn the best strategies for new or advanced investors, seeing what the experts suggest doing is crucial. Following what they suggest will rarely ever steer you wrong.

Moreover, this will give you a better idea of what to look for when selecting your own stocks. The more you learn about investing and the stock market, the better off your decisions on how to trade your stocks will be.

Both index funds and ETFs offer the perfect vehicle for long-term stock trading strategies for beginners—or even just people who don't have time to manage their portfolios too heavily.

These two kinds of stocks act as mutual funds that are publicly traded on the stock market. These allow you to diversify your portfolio with tens, hundreds, or even thousands of different stocks. These funds are also professionally managed to decrease loss risks as much as possible.

Diversification adds safety and risk reduction to your trading. This does it without you spending thousands of dollars. Ergo, it's a good idea to trade these instead of single stocks if you want to keep things conservative.

Since a lot of these funds have lots of professional oversight, they are one of the safest ways to ensure that your stock value will keep up with the economic growth. Apps like Acorns invest in mutual funds for you, using your spare change.

That being said, the best stock trading strategies for beginners often involve holding them long term.

Doing day trading can be a good route if you're okay with making bigger risks, but if you're a beginner, you might want to think of stock trading as a long-term game. Long-term investments are more stable, more profitable, and also tend to have lower tax rates than day traded investments.

This strategy may not offer fast money, but it's way more reliable than other trading strategies. At the end of the day, reliability will be as important, if not moreso, than profit. As such, it's important to keep both in mind when you choose what strategy you want to pursue.

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About the Creator

Cato Conroy

Cato Conroy is a Manhattan-based writer who yearns for a better world. He loves to write about politics, news reports, and interesting innovations that will impact the way we live.

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