Technology has made it easier than ever to jump into the stock market and start trading.
Apps like Robinhood and Stash have made it so virtually anyone can get into the market with a few clicks and start investing money in the biggest companies in the world.
But if you’re going to dive into trading, you need to know what you’re doing. That’s where people like Matt Choi come in. Choi runs Certus Trading, which offers courses on various aspects of trading, from options and commodity spreads to forex and technical analysis.
His advice is both technical and simple, advising people to do their own research and avoid media noise. The variety of courses include options for both intermediate and advanced traders.
Here’s some big-picture tips for those new to trading.
Assess your funds
It’s important before you begin trading to know how much you’re willing to risk on each trade. Many traders risk less than 1 to 2 percent of their accounts per trade. If you have $40,000 you’re willing to play with on trading and you risk only 0.5 percent on each trade, the most you can lose per trade is $200.
You should do those sort of calculations before you jump into trading. Make sure you understand how much you could lose on any given trade — and how big a loss you’re willing to take.
Assess your time, too
Trading takes time. You shouldn’t dive into trading unless you know you have ample amount of time to devote to the practice. If you give it short shrift, you will hurt your bottom line in the long run and lose the chance of positive long term results.
Start small, but avoid penny stocks
If you’re a beginner, you should focus on only one or two stocks during a session. Tracking stocks and finding opportunities is much easier if you’re focusing on a small number of targets.
However, that doesn’t mean you should focus on penny stocks, either. These stocks are often appealing because they’re not expensive, but they’re also often illiquid and the chances of hitting one that actually will pay off isn’t likely.
Unless you’ve done deep research and see a real opportunity — steer clear of penny stocks.
Take it slow
A lot of seasoned investors begin trading the moment the markets open each morning. But if you’re new to the market, it probably makes sense to wait at least 15 to 20 minutes after the bell before you start trading. That way you can begin to look for patterns and make smarter trades.
Market orders versus limit orders
When you start trading, you’ll want to know what type of orders you’ll use to enter and exit trades. Market orders are executed at the best price available at the time. There’s no price guarantee.
A limit order guarantees a price, but not the execution. They help you trade with more precision. Using limit orders allows you to limit your losses.
A trading strategy doesn’t have to succeed every time for it to be successful. Some traders only win half of the time and are quite profitable. So, it’s important to be realistic about your approach to trades — and above all else, stay cool.
If you’re looking for some foundational courses to help you learn more of the basics, you could check out EDX.org, which offers courses including Introduction to Corporate Finance and Foundations of Modern Finance, which can help you develop your basic understanding of the marketplace.
Whatever you do, don’t let your fears or greed dictate your decisions. Take a deep breath, stick to your plans, and keep honing your skills. If you do that, you’ll be fine.