Better Trader
Anyone who wishes to learn how to become a better trader can accomplish that goal if they are willing to get the proper education and put forth the effort to practice and follow directions. While the process is different for everyone, depending on their experience and expertise, here are 10 steps that can lead to becoming a better trader.
Stop making excuses: Begin by examining your own status and decide why you want to invest in the stock market. The answer will determine which approach you need to take. A trader seeking to make money for short-term needs will invest differently that someone who is trying to build or boost their retirement account.
Get the right education: Make sure you know what you're doing or you're trading account will be empty in a hurry. There are many national companies who specialize in stock market education. Make sure you select one that has experienced instructors who provide a solid foundation for learning and that will stand behind its product and help you become a better trader.
Decide what strategy you'll use: After getting an education, choose a strategy that matches your own personality. Some techniques require constant monitoring, while others are almost placed on autopilot. Risk-takers will prefer a different style of trading than someone who gets nervous and wants a more conservative answer.
Learn to read and interpret stock charts: Of the 10 steps, this may be the most important to a prospective trader. In order to conduct accurate technical analysis, you must be able to look at a price chart and have a good idea of what the stock might do. By using technical indicators (Bollinger Bands, moving averages, MACD, for example) to examine a stock, a trader will be able to gauge its potential.
Paper trade: Don't put real money on the line until you really know what you're doing. Paper trading or non-funded trading allows you to follow the process of a real trade, which teaches the proper mechanics. Experts say someone is ready to trade real money once they've made 10 consecutive successful trades. If you can't make that claim, go back and get some more practice.
Get up-to-date market information: Make sure the information you base your trades upon come from a good source, one which has good credentials and has been proven to be accurate over a long period of time. Make sure you attain your stock market quotes (bid and ask prices, option chain information, etc.) from a real-time source; you can quickly be derailed by old information.
Pick an experienced coach to follow: Look around and find a mentor, someone who has the experience you lack, and ask them for advice and assistance. Some of the most effective mentors are the instructors who provide the training at your education provider.
Fund your trading account: You can't trade without an account, so you must decide if you want to use a traditional stock broker (which offers more flexibility but comes with a steep price tag) or go with an online broker (which offers little or no advice, but comes at a bargain price). If you opt for an online account, shop around for the brokerage which offers the level of price, education and service that best suits the way you plan to trade.
Assess your progress: A wonderful idea is to keep a paper or electronic journal of your practice and real trades, whether they're successful and make money or whether something goes wrong and you lose money. The ability to review trades can help you become a better trader by pointing out the mistakes that were committed.
Consider legal structuring: Once you begin trading real money, it may behoove you to consider legal structuring for your trading account, either as a corporation or a legally structured entity. Doing so may enable you to take advantages of tax provisions that allow businesses to be taxed at a more favorable level than individuals. Check with a legal advisor or your financial advisor for advice and discern whether a structure can help.
There you have it: 10 steps that may help put your trading on the track to success and permit you to achieve the goal of being a better trader.
