Step-by-step guide for beginners in investing or trading
You have never practiced investing or trading, but you really want to start building your portfolio and have passive income in general. We have compiled a simple plan for beginners.
- Read up on what the stock market is in general and how it works
You should have at least a basic overview of what a stock exchange is, what stock indices are, who a broker is and things like that.
- Decide how much money you are ready to allocate to investing or trading
It should be an amount that it’s okay for you to lose or invest in your education, i.e. it’s not your entire salary or your last savings.
- Choose an instrument for trading
You can trade stocks, bonds, futures, options, currency pairs, cryptocurrency – there are many instruments and there is no perfect one, you can make money on each one, the only question is your goals and resources.
Ask yourself a few questions:
a) How many hours a day I can spend on studying and trading? If it is 1-2 hours, it is better to choose something simpler. For example, options will definitely not suit you, because they are complicated and require more involvement.
b) How many percent per year do I want to earn?
For instance, it’s possible to earn on average about 10-15% on stocks and 50-100% on options.
c) What level of risk is acceptable for me?
d) How often I’m ready to review my portfolio and open new trades?
e) I want to trade or invest?
And based on your answers and the information you have read, choose an instrument and study it in detail.
· Choose a trading platform, exchange or broker
Read about those that suits your instrument, work with the citizens of your country, what are their conditions for opening a trading account (minimum deposit, the size of commissions, etc.).
· Choose your first trading strategy
You should always trade not randomly, but according to a plan. This is done so that you could always analyse your mistakes, otherwise it will all be wasted. It is definitely not necessary to invent it yourself, just try the most well-known ones.
It is better to try them on a demo account, so that you could learn how to work with the platform, and not lose money on some minor things.
After a few days or weeks of trading on a demo account, try to trade small amounts on a real account, but always set stop-losses, so as not to lose your entire deposit.
It is absolutely necessary to trade on a real account. You should not spend a year only on a demo account. This is because psychology plays a very important role in trading, which often starts to fail on real money in the form of excessive greed or overconfidence. And you can get rid of them only with the help of practice.
