So You Want To Become A Share Trader?
by, 7th-March-2008 at 10:53 PM (4031 Views)
So You Want To Become A Share Trader?
Sounds impressive eh? You have visions of dollars floating through your head. Dreaming of fast cars, luxury holidays etc.
Easy money to be made just look at the newspapers there are lots of people making millions everywhere that’s if you believe all that you read in the newspapers and what you see on television.
Well it’s time for a reality check, for things are not as they seem. Sure there is money to be made especially in a bull market, (rising share prices.)It can be very easy to make money. The drawback is that the beginner is unprepared for the inevitable downturn in the share market.
Before they know it they have suffered a couple of reversals only to find that they have lost a goodly proportion of their capital and having burnt their fingers severely, leave the market very disillusioned never to return.
The market place is littered with the broken hopes and dreams of the would be share trader. And if again in the future they decide to try their luck again they are doomed to failure because their attitude and training hasn’t changed from their last foray into the marketplace arena.
So What Is The Answer?
Now taking the “Lady Luck” factor out, you are rewarded proportionately to the amount of effort you put into learning the foibles and idiosyncrasies of the share market, and learning that one of the biggest problems you will face in the market is “Yourself.”
So What Do I Have To Do To Become Successful?
Firstly there are a few things to look at before you start trading in the market.
You need to ask yourself a few questions and be very honest in your answers.
1. Why do I want to trade in the share market?
2. How much capital do I have to invest?
3. How much can I afford to lose if things don't go the way I’ve planned?
4. How much profit do I want to make? (Be realistic.)
5. What am I prepared to do to become successful?
6. Where can I get the information that I need to get started?
7. Which broker shall I use? How much will I pay for their services?
8. How much time can I spare to be a share trader.
We shall now look at the above questions in a little more detail.
Why do I want to trade in the share market?
The first thing that comes to mind is obviously to make money and not to lose it too quickly.
But really, only you can answer this question. But again be honest with yourself.
How much capital do I have to invest?
That depends mainly on you and your financial commitments. But to be practical you would need around the $2,000 mark at minimum to start with.
One reason is brokerage .You will be paying around $50. That’s $25 for buying your shares and $25 for selling them. So that is 2.5% profit you have to make to break even. Therefore if you made 10% profit which equals $ 200.00 less $50.00 for brokerage, this will leave you a profit of $150.00 or 7.5% clear profit.
(I haven’t allowed for capital gains tax in this.)
How much can I afford to lose if things do go the way I’ve planned?
Personally I would have a stop loss in place for around the 7.5% to 10% level. (For more information on stop losses see past post called “stop losses”)
But this is an individual thing as to what you are comfortable with. Also this depends on how large the amount is that you have invested in the first place.
How much profit do I want to make?
A million I hear someone say. Now that is a nice round figure but there are a few things to take into consideration first. One is to realistically pick a time frame in which you intend to achieve your monetary goal. The amount you have to invest plays an important part as well. Because the smaller the stake you start with the longer it will take you to make your financial goal. So be realistic in your goals and expectations.
Because of financial constraints I had a personal goal to begin with of only achieving $100.00 a week profit. But over time I have built the original $500.00 portfolio to around $12,000 in around three years. I have continually added my profits back in. And I have had a few losses and minor setbacks along the way.
What am I prepared to do to become successful?
The first and most important is to study, study, and more study in fact you never stop learning. Allocate time to do this on a regular basis.
I have experienced the largest learning curve in my entire life since I became serious about becoming a share trader. And the biggest problem I have faced is “The person in the mirror” Myself! For I found that the emotions of “Fear and Greed” were the first things that I had to deal with. And they still trip me up from time to time.
The person in the mirror can be your biggest enemy or friend. You will find that your emotions, attitudes will govern how you trade and react to market conditions. I am not going to go into any details here as you will find past articles in this website which amply covers all these areas.
As I have stated before the amount of profit that you make is directly in proportion to the effort you put in.
Where can I get the information that I need to get started?
Too easy! Well you have made a fantastic start by just reading this article plus there are over “900”just in this web site alone. All you have to do is take the time to go through the different categories/downloads and pick out the ones that help you the most. And they are all free!
If the information you are seeking is not there, give me an e-mail and I shall endeavor to find it for you, or failing that I will tell you where to go to get it.
Which broker shall I use? How much will I pay for their services?
This will depend on what sort of services you require. Usually the more “bells and whistles” you want the dearer the broker. The one I use at the moment is E-TRADE. I am quite happy with the services that they provide as I have a preference for doing my OWN research so if I make a mistake then I have only myself to blame.
8. How much time can I spare to share trade?
This depends on the commitment you are willing to make plus the goals you want to achieve. But the rewards definitely reflect the amount of effort that you put in to it.
But of most importance is that your life should not revolve around the stock market. You need a balance even when you have become a professional share trader.
Of course there are questions that I haven’t covered, but these are the basic ones that will help you to find your footing on the rocky road to financial freedom through share trading.
Strudy is a keen amateur share trader on the Australian Stock Market Visit his weblog for more free articles and useful information at http://www.asxnewbie.com