Buying stocks is easy. Looking for a company to invest in, hoping that your investments will turn into generous profits in the long run, is the most challenging part. That’s one of the reasons why most people don’t succeed in the stock trading industry.
If you’re into stock trading, here are some tips to help you.
Tip #1: Set your financial goal
I know it’s cliché, but setting a financial goal will certainly help you when you start stock trading. However, you need to be more specific. For example, don’t set a goal such as retiring in around 20 years and live in the countryside. Instead, make it something like retiring in around 20 years with at least $100,000, or retiring by the age of 60 with $200,000 in your account.
These numbers might be too huge, but it will help you define your goals, allowing you to focus on them.
Tip #2: Approach trading as a long-term investment
Most investors are often enticed with large short-term profits, especially those who are just starting out, and tend to overlook the investment in a long-term perspective. As a result, around 40% of all traders quit after a month, only 13% continue for three years, and only 7% can make it within five years.
However, adopting a long-term perspective is essential if you want to succeed in this area. This doesn’t mean you can’t make profits in the short term. You can, but most of the time, stocks are volatile and prices may go up and down every now and then.
For example, the Hikma pharmaceuticals’ share price was around £280 when it first sold its shares back in 2005. However, it’s now sitting at £930. Of course, the previous years have seen higher values, but the point is that investing in stocks will require time and patience.
Tip #3: Pick the right companies
As mentioned earlier, it’s not easy to look for a company to invest in. There’s an overwhelming amount of information you’ll come across as you look for potential business partners. However, you will be able to come across the right one by looking at the right places. These involve searching for information on how the company operates, who its competitors are, what’s its current ranking in the industry, and whether or not it introduces something new.
Tip #4: Don’t’ dwell on penny stocks
Penny stocks, a term used to describe stocks that are under $5, can be quite tempting. After all, it’s a common misconception that investing in a low-priced stock is a lot safer than high-priced ones. However, regardless if you buy a $5 stock that plummets to $0 or a $50 stock that has the same result, you’ve lost your initial investment either way.
A $5 stock has just the same downside risk as a $50 stock. In fact, it’s even riskier than a higher valued stock.
If done right, investing in stocks can be profitable. You just need to combine winning strategies, research, and patience to make it happen.