Wall Street investors are some of the wealthiest people in the United States. People like Warren Buffett and Carl Icahn have made a fortune in the market. Successful entrepreneurs like Bill Gates and Mark Zuckerberg have made their money because of Wall Street. While anyone can be a successful investor, it takes effort to succeed. Here are the 10 ideal way to learn stock trading.
Read Books to learn stock trading
The best way to start investing in the market is reading books. Books will open up your mind to how the stock market works, the best strategies to invest, and the top mistakes to avoid. Most successful investors have talked about how books shaped their investment careers. Warren Buffett has talked about how a book – The Intelligent Investor – changed his life. Today, there are hundreds of books about investing that you can find on Amazon. As you start, we recommend reading books like, One Up on Wall Street by Peter Lynch, Common Sense Investing by John Bogle, and The essays of Warren Buffett by Lawrence Cunningham.
Open an Account With a Stock Broker
As you start your investing career, selecting a good broker will be necessary. A broker acts as an intermediary between investors in the market. They provide a platform in which people can easily buy and sell stocks. There are several stock brokers in the United States. Some of these companies are TD Ameritrade, Charles Schwab, E*Trade, Fidelity, and Robinhood. Consider a broker like Robinhood that offers no execution costs. Also, consider a broker with an ease to use mobile and desktop investing applications. In addition, consider a broker that offers a free demo account to help you get some practice.
Get Some Training
If you don’t have a background in finance, we recommend that you enroll in an online class that will introduce important concepts to you. Today, there are so many classes about investing that you can find online. For example, a company like Khan Academy offers free trainings on various topics, including investing. Other online learning companies like Udemy, Coursera, and LinkedIn Learning too have these lessons.
Find a Mentor
Warren Buffet had his mentor in Benjamin Graham. David Einhorn had a mentor in Warren Buffett. Many successful hedge fund managers that worked for Julian Robertson have succeeded because of his mentorship. You too need a mentor to succeed as an investor. A mentor needs to be someone who has been in the industry for a long time. Fortunately, it is possible to find excellent mentors, even through the internet.
Follow The Market
You need to be passionate about everything that you do. To succeed as a money manager, you need to be passionate and enthusiastic about it. This means that you should spend time reading the latest developments in companies. This means reading materials from the Wall Street Journal (WSJ), Bloomberg, and Financial Times. You also need to watch financial television like Bloomberg and CNBC. Doing this will help you know what is happening in the market.
Read Investment Research
As an investor, you need to have an in-depth knowledge about companies. This is the reason why investment research is so important. In fact, most successful money managers spend thousands of dollars every month on investment research. You too should have access to the best of the research. A good way is to use a broker that offers sell-side research. Another way is to read reports in the various investment platforms like Fool and Seeking Alpha.
Use a Demo Platform
As mentioned above, you need to use a broker that offers a demo platform. A demo is a tool that offers all the information and data that successful managers have at their disposal. It also gives you virtual cash. Before you invest real money, you need to take time on the demo platform. In this, you need to do a few things. First, use the exact amount that you intend to start investing in. Second, take the demo account seriously as if it was real money. Third, use a structured way of opening trades. This means that you should have solid reasons for all trades that you open and close.
Study Other Investors
As you start your trading journey, we recommend that you take time to study other successful – and failed – investors. Some of the most widely known investors you should read about are Warren Buffett, Ray Dalio, Peter Lynch, and John Templeton. Failed investors you should learn from are the likes of Bernie Madoff and Long-Term Capital Management. Also, you should learn from some of the biggest investment mistakes such as Bill Ackman’s investment in Valeant Pharmaceuticals and David Einhorn’s investment in SunEdison. There will be important lessons to be learnt from all these scenarios.
Follow Specific Companies
A common mistake many investors make is that they want to follow hundreds of stocks. This is wrong. Instead of following so many stocks, we recommend that you first assess your interests. If you are passionate about technology, you should find a small group of technology stocks that you want to follow. The same is true for all the 11 sectors in U.S. stocks like retail, energy, finance, and consumer. After finding the stocks you might be interested in, you should do your research about them and follow them closely. Focusing on a small group of stocks will be much easier than focusing on so many of them.
Use Index Funds
Finally, you should consider investing in passive and diversified financial assets like mutual funds, index funds, and ETFs. These funds will help you have a diversified portfolio. In addition, you should consider investing some of your money in low-cost robo-advisors like Betterment and Wealthfront.
Summary on How to Learn Stock Trading
Investing in stocks is an interesting thing that can make you a lot of money. However, most people who get into the industry fail. Using these tips will help you know how to invest, manage risk, and succeed in the most dynamic industries in the world.