But, don’t worry, we’re not judging you for that, because we’ve all been there!
Things like technical analysis, strategies like diversification, and terms like bullish and bearish trends can really confuse and even discourage a beginner trader.
Luckily, you went to the right place.
That’s because in this article, we’ll walk you through our personalized trading 101 guides. We’ll start with the operation of the public stock market and slowly dive deeper into trading strategies, rules, and etiquette.
Let’s start learning about trading 101 for beginners, keep reading to join the journey!
How Does the Stock Market Work?
Basically, the stock market serves as an exchange ground for traders all around the world. You’ll find all kinds of investments in the stock market, and you’ll also witness millions of them getting traded by the minute.
But there’s more to the stock market’s operation than that.
For instance, you may be wondering why the stock market exists and why it’s so popular among investors and companies.
Way back in 1792, 24 stockbrokers in New York signed an agreement regarding the establishment of the stock market. This was a response to the financial panic that was happening that year.
It benefits companies worldwide greatly by helping them raise money for the funding of their operations. This is made possible by the selling of a company’s “stocks”, which are ownership stakes of the very same company.
From then on, multiple types of investments rose from the ground, a couple of the most popular ones are options and futures.
How to use Simple Technical & Fundamental Analysis Strategies?
Moving on to the deeper parts of day trading 101, we’ll talk about trading indicators and their strategies.
The stock market is where traders purchase shares of companies in an attempt to time the market’s best condition and capitalize off of it.
But the thing is, how will a trader know when a stock is ideal to buy or sell? How do they know if it has reached its peak? And how exactly do they time their purchases?
The simplest answer to those questions is through technical and fundamental analysis.
Technical analysis is a statistical discipline that evaluates the condition of a stock. It signals trading opportunities and tracks affecting factors like price, movement, and volume.
On the other hand, fundamental analysis is all about the evaluation of a stock’s condition through its intrinsic value. It uses the economic and financial factors that align with the stock and studies it to predict its effects on the stock’s value.
These tools may be used together in order to identify volume trends, short-term movements, and trade-related reactions.
How to Properly Create a Trade Plan to Minimize your Risk
Before entering the stock market, you should create an elaborate plan on trading 101 how to buy stocks. Here are a couple of things that your trading 101 plan should contain:
- An outline of your commitment to your trades. It’s important to establish why you’ll be doing these trades and what you want to achieve from them. This will ensure continuous motivation throughout the trades.
- Your trading schedule. Figure out how much time you can commit to your trading activities and make sure your goals align with the amount of time you have.
- A list of your trading goals. This list will keep you rooted and make sure your decisions are beneficial to your trading growth. Make sure that all of your goals are realistic and attainable.
- Learn about risk-reward ratios. Risk-reward ratios help traders understand what’s possible within trades and handle their expectations.
- Set a capital. Know your trading budget and build your plans around it.
- Track your progress. Acknowledge your growth and learning through trades and note down your mistakes as well.
How to Control your Emotions
Since trading is all about timing your entries and exits, your decisions must be logical. And remember, should be made with a clear mind, not with a burst of emotions.
As a trader, it should be your number 1 rule to never act out of anger. Every trader receives loss, some often happen, some periodically.
What’s important is how you react to this loss. You may still be able to turn things around, but not if you act impulsively.
In addition, you should take breaks within trades, however long you may need. This ensures a clear mind and good energy for new trades.
Although some may disagree, we believe that keeping track of profit and loss will only affect your trading habits negatively. Letting go of past trades will help you avoid bitterness and greed.
How you can Start Trading with no Market Experience
Everyone starts somewhere, and although trading without experience may be scary, a couple of trading options 101 steps may help.
The very first thing you should do is research. Google all of your questions, take down notes and don’t stop as long as there’s still confusion. Knowledge is where you’ll root your confidence when you don’t have any experience.
Make sure you set your funds and time for trading as well. Start with small trades and make sure to time them to track their volatility.
And in sight of a loss, use limit orders to avoid the guarantee of execution. Lastly, stick to your trading plans and make sure to be realistic when it comes to your trades.
How to Identify and Trade Predictable Chart Patterns
Earlier we discussed the trading indicator technical analysis.
These statistical tools commonly use a candlestick chart and place lines onto it. They are called indicators because they indicate a stock’s price movement, quality, and trends.
But the thing is, these tools won’t tell you what’s going on with your stock and what you should do with it, at least not directly.
The convergences, divergences, rise, falls, and steepness all indicate something about your stock. It all depends on the type of technical analysis you’re using.
The candlestick chart patterns should be read according to your technical analysis rules. Once read, you may confirm these readings with the use of another short-term tool.
But no matter what kind you’re using, one thing is for sure, bearish and bullish patterns will show up.
Bearish patterns are an indication of a downward price trend, which is a signal for you to sell to prevent loss. Bullish patterns are upward trends that should be responded to by buying more of the stock to generate profit.
