The advance of technology and the explosion of the internet over the last 10 years have given rise to a new breed of investors:
Online Stock Traders
In the past, investors have largely relied on stock brokers for advice and direction in how to invest retirement money, risk capital, etc. But today that is beginning to change dramatically. Many average investors are now beginning to take matters into their own hands by opening up online stock trading accounts. Major online brokers such as E-trade, Ameritrade, and Scottrade have burst onto the financial scene with fury and these companies are growing at exponential rates. In this article, we will address several important considerations for any individual seeking to profit from financial markets as an online stock trader.
Choose a trading style that fits your personality –
This is a key reason why many investors fail to profit in financial markets. Trading has been around for over a century now, and those who have made a living trading over the last century have all done it in different ways.
No single person trades the stock market in exactly the same way, and that is because we are all individuals and we see things differently, and, therefore, make decisions based on our perceptions in ways that are different from others. There is no one right way to trade the market. Truly successful online stock traders have discovered who they are as traders.
For example, if you are a very impatient person, one who loves to be in the thick of the action, then you may find it very difficult to trade longer timeframes. A scalping strategy may be a perfect fit for you. If you try to trade a long-term strategy, you may continually cut your winners short and close out losers too quick, not giving them enough time to work in your favor. Conversely, if by nature you are a more reserved person and more patient, a longer-term trading strategy may be perfect for you. These psychological differences in each person are very important when deciding upon a trading strategy. The only way to truly flush out what type of strategy works best for you is to learn several and see which one clicks with you. Part of the journey of being an online stock trader is discovering who you are as a trader, embracing it, and trading accordingly.
Find Out What You Love About the Stock Market- A major part of the online trading journey is discovering what you love about the stock market. If you’re only desire is to make money, then the allure of trading may quickly fade as the reality of hard work begins to unfold. Warren Buffet says that he would do what he does whether he was getting paid for it or not. He is simply in love with buying and selling companies. Warren Buffet loves to analyze a company, its management, its financial situation, and then make a buy or sell decision based on that analysis. As an online stock trader, you will have to do the same thing. Is there a certain sector of the economy that you have a passion for? If so, that is where you want to start. Begin analyzing that sector of the economy. Or perhaps you are more interested in technical trading. That means you aren’t really interested in finance, the economy, or the forex market, per se, but you are very interested in trading stocks as though it were a video game in a sense. This is technical trading. Extreme technical traders pay no attention to the fundamentals of a stock, but instead focus completely on chart patterns and price.
Try To Find A Mentor- This is one of the most important things a new online stock trader should do. It is always better to learn something as complex as trading from someone who is already doing it. Starting from square 1 by you is extremely difficult. Finding a friend and mentor who is already consistently profitable can help immensely. Besides the trading knowledge one will gain from a mentor, the emotional and personal relationship is just as, or even more, important. Every trader loses money at some point. And at times, those losses can be quite large.
It is not uncommon for new online stock traders to experience large draw downs as they familiarize themselves with the stock market and the psychological challenges of being a trader. It is during these times that a mentor is indispensable. When a new trader is facing the extreme difficulty of a losing streak, a mentor who has been through the fire can really help to alleviate the pain by offering words of encouragement and direction. This input from a seasoned veteran can often be the impetus a new trader needs to get up and continue on his journey.