If you are new to investing, what skills seem to be the most important to you? Maybe you spent most of your first few weeks just getting used to placing orders or figuring out which companies’ stock to buy. Those are typical challenges new people face. After a few months, however, it’s time to pick up some new skills. One of the best ways to constantly improve your technique is to review what you know, correct errors, and add new things to your investing took kit every so often. Here are five things you should consider learning about if they are not already part of your money-making arsenal.
When it comes to learning how to day trade, it can add excitement and variety to your life. Day traders never hold a position overnight. They cash out every day before the close of the market.
That means, by necessity, all their transactions are very short-term affairs, some lasting less than a minute. For the most part, though, they follow just one or two stocks closely, watching for short upward or downward moves. A sub-set of this category are the scalpers, those who rarely stay in a trade more than a few seconds or minutes.
Sharpening Your Skills
Going back to the simulator and doing a week or so of paper trading is a great way to sharpen skills and drop bad habits you might have picked up. Nearly every platform has its own version of a simulator, sometimes called trade-bots, that you can practice on.
Using fake money but following real market action, you’ll be able to hone your order placement skills and get used to entering and exiting trades quickly.
Knowing how to short stocks from this site can save you in a downward market. If your brokerage allows you to short without putting up a large sum in advance, it’s a reliable way to simply bet that a particular stock is about to decline in value.
Be sure to ask your broker’s customer service rep how the shorting process works on your particular platform. Then, you’ll be able to take advantage of choosing shares on both sides of the price line.
Protecting Your Capital
Some learn this lesson the hard way, by blowing out their accounts. You don’t have to do that to learn how to protect your precious capital. One technique that is effective is limiting your buys to a set percentage of your account value.
For instance, if your balance is $5,000, you can use the two-percent rule and buy no more than $100 worth of a given security. By putting a guard rail on your purchases, you might feel restrained at first, but will soon notice that your losses are effectively limited.
Hedging with Metals
One of the most common ways for investors to counter balance their securities holdings is by buying precious metals.
For decades, the value of the metals has traveled in the opposite direction of the major stock indices. Hedging your portfolio with gold and silver bullion or mining stocks is often a smart way to protect against major market downturns in stocks.