Curious about the best way to get started in the stock market? Take these four simple steps and you’ll be well on your way.
1. Open a Brokerage Account
To actually place market orders and execute trades, you’ll need a brokerage account.
As a trader, it’s important to choose a good broker because this is basically how you’re going to execute your trades. You don’t want to be surprised down the line to learn that you’re subject to fees or percentages that are higher than you thought.
Be sure to take the time to research the different options out there so that you can choose the best one to suit your personal style.
Choosing a broker isn’t a one-size-fits-all model. The right broker for you will depend on things like the amount of money you want to start within your account, your personal style, what types of tools you’re looking for, and so on.
2. Penny Stocks: Smart Investments With Little Money
Many new traders are starting out with small accounts. As such, it’s important to make the most of every investment.
At the same time, as a new trader, you want to focus on small gains. You don’t want to take huge positions in trades, but rather to build confidence and experience through small trades at first.
However, on the big exchanges, even a single share of many stocks can be pricey — for instance, few new traders could afford many shares of Amazon, which at the time of this writing is trading for close to $1,900 per share.
Buying a single share of a mega-cap company is no way to grow your account quickly. So how is a trader to work on building an account and gaining experience? In my opinion, the best and most accessible way is to trade low-priced stocks, aka penny stocks.
Penny stocks aren’t always sold for literal pennies. But they’re stocks that trade for very low amounts, usually less than $5 per share.
While the penny stock market is notoriously volatile, its rapid fluctuations can offer the opportunity to profit quickly and with minimal investment.
Penny stocks allow you to make small investments and focus on gains, no matter how small, so you can build your confidence and benefit from trading.
Penny stocks are how I made my fortune in the stock market, and they’re the primary focus of my teaching. I firmly believe that they offer opportunities for traders, particularly those who are starting with small accounts.
3. Strategies That You Need to Master
The stock market is all about strategy. Without a plan, you’re really not doing much more than gambling.
To really make intelligent trades, you have to perform plenty of research. This typically starts with creating a watch list of stocks that are experiencing movement and narrowing down your choices. Then, it’s time to analyze.
This might start with fundamental analysis, where you do research on the company offering a given stock.
By evaluating their past performance and the outlook based on earnings reports, press releases, and the overall buzz around the company, you can get clued in on catalysts that could have a positive or negative effect on the stock’s price.
From there, though, you need to back it up with numbers and data.
As opposed to fundamental analysis, where you’re focusing on the trajectory of the company offering a stock, here you focus on the actual stock’s performance.
You’ll look at historical data to review the stock’s performance over time, looking for any past trends that could inform what the stock will do in the future.
Key Chart Patterns
Over the years, I’ve been able to identify key chart patterns that I depend on and look for when seeking out trades.
For instance, my absolute favorite is called the “supernova”. It’s named after supernovas in space, which have a big explosion and then fizzle out.
This amounts to an explosion in a stock’s price that offers many opportunities for traders, including the ability to buy as the stock is ascending in price, or to short-sell on the way back down (or, sometimes I do both).
While that’s my favorite pattern, it’s far from the only one out there. In my pennystocking e-guide, I detail more patterns in greater detail.
4. Never Stop Learning
A continued dedication to learning is not just important but essential as a trader. After all, as William S. Burroughs once said, “When you stop growing you start dying.”
For one thing, continuing to learn will help you be better able to adapt to market shifts and changes. When the market changes and your go-to setups aren’t working anymore, having a large knowledge base can help you make changes that can help you become and stay profitable.
Maintaining a trading journal can be pivotal in this regard, too. It allows you to keep track of your own patterns as a trader, and learn from your own past experience.