Getting started in the game of stock trading can be both exciting and fearful. The exciting part you can make a ton of money but fearful because in this industry being wrong can cost you money and lots of it. Which is why I want to lay out a stock trading game plan for you as a beginner.
One of my favorite acronyms for F.E.A.R. is False Education Appearing Real. When it comes to new traders the main cause of fear is entering into this new industry with little or no education at all. If you do not understand the game and how it is played then every thing you hear on the news and every up and down in the market will scare you. So I want to give you a game plan to get you started on the right foot.
Now I’m assuming you already have a trading account but if you don’t I recommend you setting up an account with one of my favorite brokers at-least at the time of writing this Options Xpress. You can click here to see a free video I recorded on how to open an account with them. So let’s assume you are past this part and let’s dive into your game plan as a new person.
First things first get familiar with the trading platform
No matter what broker you are with you should learn how to enter and exit a trade. This part is crucial as I can’t tell you how many people including myself have placed a trade to sell something I didn’t have or buy the stock when I meant to buy the option and vice versa. So get familiar with the platform, specially buying and selling stocks or options or whatever security you are planning to transact with.
To get familiar with the trading platform I recommend you placing practice trades. Many brokers likes OptionsXpress have “virtual trading” platforms. What that means is that it is a simulated real environment that allows you to place trades as if you were in the live environment but with fake money. Even though the money is fake the entire process is a carbon copy of the real thing and will give you the practice and familiarity you need when it’s time to execute a real trade.
How to find a handful of stocks to trade
One of the questions I often get asked from new traders is how do I find good stocks to trade. A common mistake is that new traders chase every stock like a dog running after moving cars. Most professional traders get to know about 30 stocks really well and then trade those stocks at the most opportune time. So as a new trader I recommend creating a watch list of about 30 stocks and here are a few ways to do it.
- One of the ways I teach in my course is to take 6 industries that are within the S&P 500 hundred and pick 5 stocks from each of those six industries. That way you have a broad array of industries and stocks within those industries so your chances of finding something moving is increased and if you decide to trade more than one stock you are not over exposed to on industry.
- Here’s one of my stock market hacks that I used when I first started. The Investors Business Daily also known as the IBD publishes the “Top 50” stocks which at the time comes out every Saturday. So for roughly $3.00 you can get a set of 50 stocks based on their stock market research and measuring system.
- Also you can either buy or partner up with a mentor or someone in this industry that uses professional grade software. For example in my stock market coaching mentorship program I meet with students online live during a webinar and use the software to scan for stocks that meet my criteria and look for trade set ups that fit my trading style.
No mater how you choose to find your stocks as a newbie pick 30 and stick to them until you are comfortable moving on. Less truly is more in this industry.
Practice to Profits
Now that you are familiar with the platform and you have your 30 stocks you are watching. it’s time to practice your way to profits. That’s correct it’s time for you to place a trade (not a real one of course) lol you’re not ready for that yet. Remember that virtual trading account we talked about earlier. It’s time for you to place a virtual trade as if you had the money and did the research on the stock and follow the trade through from beginning to end.
Following the trade through to the end means writing down why you bought the stock, what you bought the stock at, what did you sell the stock or option at and why. This is one of the most important part that new traders skip. They think because it is not real money they will not do all the normal steps but think they will when it’s a real trade. Let me tell you if you start off taking short cuts you will take those same short cuts with real money because you will have developed a bad habit.
Putting It All Together
Short cuts and bad habits in this industry is what we call gambling and usually the house wins. So remember get familiar with your trading platform, find 30 stocks to watch and practice your way to profits while documenting the entire process. You should either be profitable 7 out of 10 trades or the out of the 10 trades the net gain should be greater than your net loss. Then you’re ready for real money.