As an entrepreneur, you are always looking for new ways to grow your business.
You are always looking for new sources to acquire new customers.
You are always looking for new ways to earn more profits.
But have you ever considered trading the stock market? If not, you should!
Few entrepreneurs think of trading as a viable source of profits. They think it’s too difficult to learn. They think it’s too expensive to get started. They think it’s too risky to get into.
But the truth is, trading can be very valuable to entrepreneurs because you can make massive profits while you’re sleeping.
Think about it – what if you could trade the stock market while you’re sleeping and wake up each morning with more money in your pocket?
You could buy more equipment for your business, hire more employees, or even reinvest in your business for even greater growth.
In fact, I have helped countless business owners become profitable traders, and I can help you too.
In this guide, I’m going to teach you everything you need to know to get started trading the stock market.
Now let’s get started.
Understand Fundamental Analysis
Fundamental analysis is the study of the fundamental factors that determine the value of securities, including a company’s financials, economic indicators, and such factors as interest rates, political risks, etc.
Fundamental analysis is based on the study of economic indicators and financial reports of a company to find out its intrinsic value.
Fundamental analysts usually use a top-down approach when analyzing a company’s fundamentals. They start by examining the economic or market environment and then move on to company-specific factors.
Fundamental analysis can be both a qualitative and quantitative process. Quantitative analysis requires traders to analyze historic data, such as debt, liquidity, and earnings, and compare them against the current information.
Quantitative analysis can also involve performing calculations on historic data to make forecasts.
Qualitative analysis involves analyzing a company’s fundamentals and comparing them to those of other companies within the same industry, as well as those within the same industry sector.
Fundamental analysis can help you make more informed trading decisions but will not tell you when to buy or sell a security.
Its goal is to identify investment opportunities as they arise, such as when a company announces a good earnings report or there is an increase in demand for its product.
By understanding fundamental analysis, you can predict how stock prices are likely to move in response to events that occur within the economy or within a specific company (such as a takeover).
Understand Technical Analysis
Technical analysis is a method of forecasting the direction of prices through the study of past market data, including price and volume activity.
The analysis techniques include charting, statistical analysis, and pattern recognition.
Technical analysis uses many tools that are publicly available via investing websites and apps. The tools are easy to use and fairly easy to understand.
Technical analysis tries to identify price trends and predict future price movements by the use of charting patterns, statistics, and tools such as Gann Fans, Fibonacci retracements, and moving averages.
A key component of technical analysis is recognizing when new trends are forming and when old ones are coming to an end.
The patterns used by technical analysts tend to be helpful in identifying entry and exit points.
For example, a trader might use a chart pattern like a wedge to identify an entry point after an upward breakout from a downward trendline.
A trader might then exit the trade once the price falls back into the wedge formation or breaks through the trend line again.
By understanding technical analysis, you can better understand how to use charts to forecast price movements and make trades based on these predictions.
Learn from the Experts!
Trading is a journey and there’s no shame in learning from the mistakes of others. One of the best ways to learn is to watch other traders who have mastered their craft.
The beauty of the Wealthy Education website is that you can watch videos from traders who are at different experience levels.
Watching other traders’ trades can help you learn about their thought processes and strategies. You can learn from their successes and mistakes.
You should watch some videos on basic technical analysis for beginners and then move on to more advanced-level videos.
Some traders like to trade the news while others don’t. By watching other traders you can learn different trading strategies.
You can also learn from the thoughts of successful traders by reading their books and following their blogs.
Learning to trade is hard. The last thing you want to do is listen to some guru telling you how they made millions by trading.
Chances are you won’t become the next George Soros overnight. The best way to learn is from doing and watching other successful traders trade in real-time.
Make sure you ask questions. And make sure those mentors are teaching you something you can use right away and teach you how to trade.
Find a Reliable Stock Broker
The stock market can be a scary place. It’s filled with scams and shady brokers trying to rip you off with bad advice and bad products.
In order to help you navigate the murky waters of online stock trading, I’ve put together a few tips on what to look for when choosing a stock broker.
First, check out their reputation on the Internet. This can give you some insight into how the broker treats its clients. If the broker has a bunch of complaints, you may want to look elsewhere.
Next, make sure the broker you select offers the services you need. For instance, if you prefer to trade options or futures you may want to find a broker that offers those services.
Finally, make sure the broker you select offers a good trading platform that is easy to use. While many brokers offer the platform for free, some charge an extra fee to use their platform.
Before choosing a broker, make sure to ask family members, friends, and co-workers for recommendations.
If these people don’t trade themselves, they can at least tell you who they trust for their trading needs.
Start Trading Small – Practice Makes Perfect
Trading with a small account is a great way to learn the craft of trading. It also allows you to practice without risking too much money.
When I started trading, I traded with a micro account and eventually made the transition to a small account.
It’s best to start with a micro account. This allows you to test out different strategies and hone your skills without risking too much.
Once you’re comfortable with your trading strategy and money management techniques, you can move on to a small account.
Trading with a small account allows you to get a feel for the market without risking too much money and helps you develop trading habits that will ultimately help you be successful.
Be Patient
Patience is a virtue in trading.
As a beginner, you are likely going to need time to learn the craft and develop the skill set to become a successful trader.
Most professional traders recommend trading with a demo account for at least 3 months to a year before risking real money. This allows you to learn the craft without risking any of your money.
Once you feel you have a good grasp of the market and your trading strategy, then it’s time to start trading with real money with a small amount that you can afford to lose.
Remember though, that entering and exiting trades quickly is easier said than done and you will most likely have losing trades along the way.
Don’t try to make up those losses or chase them. That’s a good way to lose more, or even worse, risk your entire account.
Patience is a virtue but so is recognizing when it’s time to walk away from the table.
Don’t Over-trade
Trading can be addictive and once you start, it’s hard to stop.
But it’s important to realize that over-trading is the number one killer of trading accounts.
It’s important to note that the average trader is not a profitable trader. Only 10% of traders are profitable over the longer term.
So if you’re in that 10%, good for you! But most traders will lose money over the long term.
A trader’s account is like a bank account. You have to deposit funds into your account before you can start trading. If you don’t deposit anything into your account, you can’t spend it – so you can’t trade.
So you can see how over-trading can wipe you out quickly. Remember to manage your risk per trade and only trade when you’re comfortable with the risk amount you’ve set.
Manage Your Risks
Risk management is very important to successful trading. You need to make sure that you never risk too much of your capital on any single trade.
As a rule of thumb, don’t risk more than 2% to 3% of your capital on a single trade.
If you have $1000 of stock trading capital, then don’t risk more than $20 to $30 on a trade.
Although this might seem like a small amount, it can really add up quickly. If you are trading multiple positions and adding up to $60 or $70 in losses on 3 trades, then it’s a bad day of trading.
It’s not always possible to avoid losing on trades but try to find trades with less risk potential.
Once you start trading, you’ll quickly realize that you can take profits as well as take losses.
Trading is a risky venture and there are many risks involved. The key is to manage your risk properly and to always be aware of where you are in the market.
You must be aware of the current market conditions so you can properly manage your risks. For example, if the market is trending up then it’s better to take profits than to try and catch a falling knife.
On the other hand, if the market has taken a turn for the worse then it’s best to get out before it’s too late.
If you’re planning on catching a falling knife then make sure that your stop loss is far enough away from the entry point that it won’t cause you to get stopped out.
One way to do that is to place your stop loss far enough away from the entry point that it accounts for the market moving against you by an amount equal to your profit target.
Summary
The key to successful stock trading is discipline – the ability to stick to your trading system and rules even when it gets tough.
Disciplined traders will limit their losses and take their profits when they’re supposed to, while most unsuccessful traders will throw in the towel at the first sign of trouble and quit before their strategy has a chance to work in their favor.
As you start to develop your own trading system, it’s very important to test it thoroughly.
Start out by using a small account so that you can practice trading without risking too much money.
Once you’re comfortable with your trading skill, move on to a small account and trade regularly for at least a couple of months before risking real money.
Once you’ve traded consistently for several months with real money, then you can start increasing the size of your trading account.
Good luck on your stock trading journey as an entrepreneur.
