Beginners in stock investment are often in need of effective advice. These advices are collective wisdom of the top gurus in stock trading investment. I will not be able to named it all because the source is just too many. For details, you can easily Google this up to find out more about the following advice.
If you asked whether its effective or not, yes its effective. But in reality an effective technique is not enough to reap profits. You still need financial education, talent, right attitudes and complete understanding of the stock market to succeed. Take this advice as only a tip of an iceberg, the real hard work still needs to be done in your part.
Advice #1: Aiming for Quick Money is the fastest way to lose BIG amounts of money.
Why? Getting rich quick in stocks is like shooting yourself in your own foot. Why? Its a matter of luck. And this “luck” factor is never been an effective strategy in stocks. Too often you read stories of getting rich quick in stocks, think twice before you believe in them. They are often marketing methods just tempting you to buy their systems.
The best investors in the world which is Warren Buffet takes his entire life to accumulate wealth. And only a very few investors in the world that can match his experience and skills. Why would you want to be rich quick when only a handful of financial experts succeed from their young until the old age?
This is where patience in stock trading is very important. If you read stories about holding to stocks for a very long time to reap profits is a sound advice. Assuming you pick-up a good stock because it will surely appreciate over time. Effective techniques such as cost averaging and long term stock investment needs years to reap its effective financial rewards.
Advice #2: Do not buy stocks with products you do not use
Its simply because if you are buying those products that you really need, it simply proves the company is indeed producing valuable products. This “need” by its customers can cause the stocks company value to increase. For example, I am a marathon runner and all the time, I used to love Nike Shoes because of durability, performance and quality. So when I invest some of my savings in stocks, I would definitely try to invest Nike shoes first, because its the products that I use and love.
Advice #3: Do not buy stocks for businesses you do not understand
Again, all too often you get stock reports from brokers and other financial services tempting you to buy that stock because its the next BIG thing. Simple say NO. Its because that would be a nice trap of investing into a business that you do not understand.
You should only invest in stocks of companies that you know how their business and money making really works. For example, supposing I am a webmaster and knows Google very well. I know that Google makes a lots of money from advertising online and is their main source of revenue. I even use Google products on my site and even make money from Google ads.
So it make sense that if I have an opportunity to invest in stocks, I would definitely pick Google on top of my list. Its the business that I understand.
Advice #4: Always assume you lose all your money in stocks tomorrow
This does not mean you should think negatively. In fact this advice helps you to re-consider risk and money management as a very important tool in stock trading. In financial risk management, it will teach you NOT TO INVEST ALL YOUR MONEY in stocks. The primary reason is security. Stock trading is a random game, you will never know what will happen tomorrow. So this means only invest a percent of your savings in stocks. Investing your entire savings is a big mistake. Typically how much percent depends on how risky you are. You might want to read this tutorial on how much to risk when trading stocks.
A lot of beginning investors in stocks would become bankrupt very soon because they let their entire savings invested in such a high risk environment.
Advice #5: Always Test everything on paper FIRST
You might have read about “paper trading”. Its a very effective tool that will let you test your techniques and trading methods and strategies without using real money. Other types of paper trading online are stock trading games that you could join for free. Most stock brokers have this kind for service. Of course, do not fool yourself. If it seems effective on paper does not mean its “100%” effective on real trading. Why? Its because if you are trading real money-> “greed”, “emotions” and “fear” will be joining your game. Your goal in paper trading is that you should invest in stocks confidently without the emotions, greed or fear being a factor in the decision making.