The great mathematician Euclid once said that “there is no royal route to geometry”. The same applies to stock market trading too. There really is no quick and easy royal route, but there is certainly a disciplined route to learn stock trading. Here is how you can go about it. Remember the basic premise that to learn stock trading, there is nothing like the real thing. So start by opening your online trading account. You can never get the pulse of the market unless you trade your own money.
How to start trading effectively in the stock market?
- It all begins with opening a online stock broking account and demat account. As mentioned earlier, there is nothing like the real thing. Simulation only works up to a point. Find a good online stock broker and open an account. Become familiarized with the layout and free trading tools and education offered to clients. That is the place to start.
- There is a lot of knowledge on markets floating around. Read good books like Buffett and Ben Graham to understand markets. Read books by Livermore and William O’Neil to get a hang of trading.
- Books are a good starting point, but they are static. Read blogs and articles to keep updated and to sharpen your insights and analytical skills. You must also read the annual letter of Buffett and the memos of Howard Marks of Oak-tree Capital. Television watching should be to the bare minimum as there is too much noise there.
- Go out and get a good mentor to learn with. Most mentors are more than willing to share their knowledge and expertise and you just need to go out and ask. A good mentor is willing to answer questions and keep spirits up when the market are tough.
- Try to learn what made great investors into such icons. The best of names like Graham, Soros, Livermore, Buffett and Templeton had some unique quality that enabled them to carve a niche. Check that out.
- Consider paid subscriptions. When you pay for research, you see value and you also make the best of it. Paying for research and trade ideas can be educational. Some investors may find watching or observing market professionals to be more beneficial than trying to apply newly learned lessons themselves. There are a variety of paid subscription sites available across the web. Just don’t get carried by marketing claptrap.
- A good way to spruce up your skills is to attend seminars and online webinars. They are a good forum for acquiring knowledge, building your network and bouncing off ideas. Most seminars focus on one specific aspect of the market. Some seminars are free, which can be a beneficial experience; just be cautious of the sales pitch!
- Like a swimmer or a racer, the trader can never operate in a simulated environment. The real thing likes in front of the screen and that is what you need to be familiar with. That is where your mental reflexes get tested. We can be heroes in a simulated environment but the challenge is when you have to see real money getting evaporating.
- Start investing small orders but do so with the intent to buy and hold for the long term. You cannot start out as a trader. First get familiar with the market mechanism. It is quite simple and you can learn these basic things in a few days. Of course, you can always close out your position when you are profitable in a trade.
- Keep it simple. Don’t try and get into very complicated derivative trades to begin with. Buy equity, keep a target and exit when the target is reached. Once you are able to do these simple steps in a systematic and disciplined manner, half your job is done.
Clearly, there is no royal route to stock tracing just as there is no royal route to geometry. You need to learn the ropes of analysis and stock selection and execution on your own with an online account.