Experience is a successful trader’s most powerful weapon. By analyzing past failures and progress, a market player can develop a perfect trading strategy. At the same time, what should beginners do when they lack a rich trading history? The answer is clear - they should heed the advice of professionals. In this lesson, you can find the best recommendations that may help newbies master trading quickly and easily.
To begin with, you should remember that all successful market players were once greener with no substantial experience. Even Wall Street legends felt insecure at the beginning of their paths. They made mistakes, suffered losses, and even went bankrupt. For that reason, the most useful advice ever given to novice traders by financial gurus sounds pretty simple: you should not strive to become a professional trader right away or trade as if you are in the top league. Let everything happen evenly and progressively.
A rough path awaits every beginner who wants to make not a random but stable profit. The most important thing on this adventure is to focus on training and broaden your knowledge. Self-training is the key to professional growth in trading. Larry Williams, an American stock player and financial expert, has repeatedly emphasized its importance by saying that “successful trading comes from understanding the marketplace and an even better understanding of yourself.”
Let’s find out what important tips savvy traders that have earned a fortune give to beginners:
1. Always think about risks.
American Ed Seykota is a pioneer in electronic trading platforms. He is also famous for his approach to money and risk management. The well-known speculator always says that first and foremost, traders should think about the ways to protect their current capital instead of earning a profit. He believes that this is the key to long-term survival in the market. The less risk you take, the less disappointed you will be in trading. Consequently, you will start generating a stable profit and make trading your life’s work.
Having gone through a succession of failures in the commodity market, Ed Seykota formulated his golden rule that he uses whenever he trades. “The elements of good trading are (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.”
The eminent trader says you should spend no more than 10% of your free margin on trading. You must risk only what you can afford to lose. You should never risk funds you will need, for example, to buy food or pay utility bills. Moreover, you should never borrow money for your start-up capital.
Ed Seykota also pays special attention to the importance of calculating risks. He pinpoints that risks should not exceed 1% of a deposit to prevent large fluctuations in the trading account. This will help you minimize losses. On top of that, you will not suffer unnecessary emotional distress.
The trader also suggests that more experienced traders should find a balance between higher and lower risks. In other words, they should risk the amount of money they can afford to lose. At the same time, these funds should be enough so that you can feel the profit. If the deposit is too high, you will have to cope with constant pressure from your fears. Otherwise, you may not receive the expected income and fall into the overtrading trap because when you are after the number of trades, you will end up being burned out.
2. Leave emotions aside
Jesse Livermore, an American stock trader of the early 20th century, is famous for earning and then losing his capital several times. He also admitted that strong emotions stood behind his failures. Livermore was sure that “emotional control is the most essential factor in playing the market. Never lose control of your emotions when the market moves against you. Don’t get too confident over your wins or too despondent over your losses.”
The famous trader considered fear that haunts market players every time they lose money to be one of the most destructive feelings. This pattern is still relevant. For example, you have invested in an asset that started falling sharply with time. What would the majority of novice traders filled with fear do? Of course, they would be selling such an asset at an unfavourable price, fearing they could lose even more. However, Jesse Livermore says you should try to suppress your emotions and recall what made you purchase the asset. Simply put, you should weigh all potential pros and visible cons of your trade.
For example, in 2015, Tesla shares went down abruptly. Amid a continuing bearish trend, many stock market players chose to sell their Tesla shares. In a couple of months, the situation drastically changed. If traders had taken time to carefully analyze the market, they would have foreseen such an outcome and would have yielded larger profits.
3. Do not follow the crowd
The one and only Warren Buffet, who turned his $100 into $25 billion within 13 years, says novice traders should not follow the crowd and always think for themselves. One of Warren Buffett's most famous investment sayings is: “Be fearful when others are greedy. Be greedy when others are fearful.”
In his interviews, the well-known investor has repeatedly warned novice traders against the most common mistake – blind faith in headlines. According to Buffett, the press only makes a lot of noise, while market players should always scrutinize any information.
Unfortunately, many beginners often disregard this rule and blindly believe sensational headlines. As a rule, all this leads to excess demand and a collapse in the market. If it turns out that the news is fake, nobody will be interested in cheap securities. For example, amid the hype around dot-coms in the early 2000s, the NASDAQ index collapsed almost 1.5 times, and the bubble burst.
By the way, Warren Buffett did not suffer losses because he did not follow the crowd and did not invest in IT companies at that time. Likewise, you should always look to the right when the crowd’s gaze is turned to the left. Do not be afraid to think outside the box and act differently.
Purchase assets when you see that everyone is pessimistic about it and sell them when everyone feels euphoria. Many successful traders follow this approach, including legendary George Soros. He always avoided strong trends, focused on small events, and made billions of dollars on that. In 2013, he bet against the Japanese yen when others did otherwise. This strategy brought him 4$ billion.
4. Know everything about every asset you buy
The books of American investor Peter Lynch are very popular among novice traders. In his books, you can find plenty of useful trading tips. Peter Lynch always emphasizes that the most important ingredient in the formula of success is competence. Like Warren Buffet, Lynch never follows the crowd but listens to what his intuition tells him. He does not invest in something he knows nothing about. According to Peter Lynch, “the worst thing you can do is invest in companies you know nothing about.”
In the early 1970s, Lynch purchased Hanes shares because his wife bought the brand's tights and spoke well of them. Within the time period that he owned the company’s shares, its assets have risen in price by more than 6 times. The eminent investor believes that an attractive issuer whose name is on everyone’s lips does not necessarily mean a good investment. He recommends that traders take a closer look at underrated companies whose products we use regularly in our daily lives.
Peter Lynch sees a potential gold mine in the following circumstances:
own niche ( if the company is a monopolist in any field, its shares have a greater chance to soar in the future);
steady demand for manufactured goods (according to Lynch, pharmaceutical and food companies have the best growth potential);
purchasing the company’s shares by its employees (this shows employees’ interest in good results, thus increasing the likelihood that shares will swell in the future).
The investor suggests that an eagle-eyed beginner can come across promising companies in any industry before professionals find them. At the same time, he urges not to listen to the forecasts of Wall Street experts but to research all the information about the issuer's business.
5. Turn the tide
American billionaire Sam Zell, known as the grave dancer, prefers to invest in problem assets. “Look for good companies with bad balance sheets and understand your downside,” the acclaimed investor says.
He is mainly interested in issuers who are going through tough times and have proven to be good at handling crises well in the past. When the company’s shares fall in price, Zell uses this opportunity to purchase them in large amounts, hoping to make a handsome profit when bad luck runs out and the company gets on its feet.
Last year, when the stock markets collapsed amid the outbreak of the coronavirus, the investor turned his attention to energy stocks although the companies incurred substantial losses (they were down by around 30% at the end of May 2020). A year later, when the global economy showed signs of recovery, US energy stocks went up and even became leaders in terms of growth.
The purchase of problem assets is considered to be one of the riskiest investments. However, Sam Zell was never intimidated by instability, unlike many of his colleagues. He even invested in companies that were on the verge of bankruptcy. He always assesses what percentage of the issuer’s current potential has not been realized.
Indeed, you should have tremendous courage to pursue such a strategy. Firstly, you should possess great analytical skills. When you carefully study the company’s financial history, make sure it is risk resistant. You can afford to take risks only when seeing the firm’s growth potential.
If at least one condition is not met, there is no need to rush to enter the market. Remember that even those who give valuable advice can make mistakes, let alone newbies. This is what happened to Sam Zell. In 50 years of his trading activity, he made only one grave mistake, but he remembers it up to this day. In 2007, he invested in The Tribune, hoping to pull his famous trick. He intended to restructure the newspaper business, find a profitable tax loophole and improve the company's financial condition. Unfortunately, this venture ended in the bankruptcy of the firm.
As you can see, even the world's best traders can sometimes give bad advice. Therefore, everything you hear should always be analyzed. You should never use a professional's quote in your trading just because it sounds attractive. You should use it only if it works for you and your strategy.
We have prepared a list of universal and most useful trading tips for beginners:
Begin with a DEMO account
Before proceeding to online trading, you should test your strategy on a demo account. You will learn how to obey rules and make a profit.
Improve your skills
Before you start trading, it is very important that you study the trading platform. Beginners sometimes confuse buttons, which leads to silly mistakes. For example, they may open a short position instead of a long one.
Study analytics regularly
Newcomers usually focus on technical indicators. However, experienced traders say they should study analysis on a regular basis. Sometimes, this data is not in line with technical indicators.
Find your niche
The trader should understand what assets they know how to trade. Otherwise, you will just waste your time and money.
Be prepared to explain
Every time, traders open a position, they should clearly know why they do so. Experienced market players never rely on their intuition. They explain their choice based on technical and fundamental analysis.
Admit your mistakes
When traders press a button and enter the market, they take full responsibility for their decisions. In case of failure, it is solely their responsibility. Neither the broker, the market, nor the chance has anything to do with tham.
To begin with, you should remember that all successful market players were once greener with no substantial experience. Even Wall Street legends felt insecure at the beginning of their paths. They made mistakes, suffered losses, and even went bankrupt. For that reason, the most useful advice ever given to novice traders by financial gurus sounds pretty simple: you should not strive to become a professional trader right away or trade as if you are in the top league. Let everything happen evenly and progressively.
A rough path awaits every beginner who wants to make not a random but stable profit. The most important thing on this adventure is to focus on training and broaden your knowledge. Self-training is the key to professional growth in trading. Larry Williams, an American stock player and financial expert, has repeatedly emphasized its importance by saying that “successful trading comes from understanding the marketplace and an even better understanding of yourself.”
Let’s find out what important tips savvy traders that have earned a fortune give to beginners:
1. Always think about risks.
American Ed Seykota is a pioneer in electronic trading platforms. He is also famous for his approach to money and risk management. The well-known speculator always says that first and foremost, traders should think about the ways to protect their current capital instead of earning a profit. He believes that this is the key to long-term survival in the market. The less risk you take, the less disappointed you will be in trading. Consequently, you will start generating a stable profit and make trading your life’s work.
Having gone through a succession of failures in the commodity market, Ed Seykota formulated his golden rule that he uses whenever he trades. “The elements of good trading are (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.”
The eminent trader says you should spend no more than 10% of your free margin on trading. You must risk only what you can afford to lose. You should never risk funds you will need, for example, to buy food or pay utility bills. Moreover, you should never borrow money for your start-up capital.
Ed Seykota also pays special attention to the importance of calculating risks. He pinpoints that risks should not exceed 1% of a deposit to prevent large fluctuations in the trading account. This will help you minimize losses. On top of that, you will not suffer unnecessary emotional distress.
The trader also suggests that more experienced traders should find a balance between higher and lower risks. In other words, they should risk the amount of money they can afford to lose. At the same time, these funds should be enough so that you can feel the profit. If the deposit is too high, you will have to cope with constant pressure from your fears. Otherwise, you may not receive the expected income and fall into the overtrading trap because when you are after the number of trades, you will end up being burned out.
2. Leave emotions aside
Jesse Livermore, an American stock trader of the early 20th century, is famous for earning and then losing his capital several times. He also admitted that strong emotions stood behind his failures. Livermore was sure that “emotional control is the most essential factor in playing the market. Never lose control of your emotions when the market moves against you. Don’t get too confident over your wins or too despondent over your losses.”
The famous trader considered fear that haunts market players every time they lose money to be one of the most destructive feelings. This pattern is still relevant. For example, you have invested in an asset that started falling sharply with time. What would the majority of novice traders filled with fear do? Of course, they would be selling such an asset at an unfavourable price, fearing they could lose even more. However, Jesse Livermore says you should try to suppress your emotions and recall what made you purchase the asset. Simply put, you should weigh all potential pros and visible cons of your trade.
For example, in 2015, Tesla shares went down abruptly. Amid a continuing bearish trend, many stock market players chose to sell their Tesla shares. In a couple of months, the situation drastically changed. If traders had taken time to carefully analyze the market, they would have foreseen such an outcome and would have yielded larger profits.
3. Do not follow the crowd
The one and only Warren Buffet, who turned his $100 into $25 billion within 13 years, says novice traders should not follow the crowd and always think for themselves. One of Warren Buffett's most famous investment sayings is: “Be fearful when others are greedy. Be greedy when others are fearful.”
In his interviews, the well-known investor has repeatedly warned novice traders against the most common mistake – blind faith in headlines. According to Buffett, the press only makes a lot of noise, while market players should always scrutinize any information.
Unfortunately, many beginners often disregard this rule and blindly believe sensational headlines. As a rule, all this leads to excess demand and a collapse in the market. If it turns out that the news is fake, nobody will be interested in cheap securities. For example, amid the hype around dot-coms in the early 2000s, the NASDAQ index collapsed almost 1.5 times, and the bubble burst.
By the way, Warren Buffett did not suffer losses because he did not follow the crowd and did not invest in IT companies at that time. Likewise, you should always look to the right when the crowd’s gaze is turned to the left. Do not be afraid to think outside the box and act differently.
Purchase assets when you see that everyone is pessimistic about it and sell them when everyone feels euphoria. Many successful traders follow this approach, including legendary George Soros. He always avoided strong trends, focused on small events, and made billions of dollars on that. In 2013, he bet against the Japanese yen when others did otherwise. This strategy brought him 4$ billion.
4. Know everything about every asset you buy
The books of American investor Peter Lynch are very popular among novice traders. In his books, you can find plenty of useful trading tips. Peter Lynch always emphasizes that the most important ingredient in the formula of success is competence. Like Warren Buffet, Lynch never follows the crowd but listens to what his intuition tells him. He does not invest in something he knows nothing about. According to Peter Lynch, “the worst thing you can do is invest in companies you know nothing about.”
In the early 1970s, Lynch purchased Hanes shares because his wife bought the brand's tights and spoke well of them. Within the time period that he owned the company’s shares, its assets have risen in price by more than 6 times. The eminent investor believes that an attractive issuer whose name is on everyone’s lips does not necessarily mean a good investment. He recommends that traders take a closer look at underrated companies whose products we use regularly in our daily lives.
Peter Lynch sees a potential gold mine in the following circumstances:
own niche ( if the company is a monopolist in any field, its shares have a greater chance to soar in the future);
steady demand for manufactured goods (according to Lynch, pharmaceutical and food companies have the best growth potential);
purchasing the company’s shares by its employees (this shows employees’ interest in good results, thus increasing the likelihood that shares will swell in the future).
The investor suggests that an eagle-eyed beginner can come across promising companies in any industry before professionals find them. At the same time, he urges not to listen to the forecasts of Wall Street experts but to research all the information about the issuer's business.
5. Turn the tide
American billionaire Sam Zell, known as the grave dancer, prefers to invest in problem assets. “Look for good companies with bad balance sheets and understand your downside,” the acclaimed investor says.
He is mainly interested in issuers who are going through tough times and have proven to be good at handling crises well in the past. When the company’s shares fall in price, Zell uses this opportunity to purchase them in large amounts, hoping to make a handsome profit when bad luck runs out and the company gets on its feet.
Last year, when the stock markets collapsed amid the outbreak of the coronavirus, the investor turned his attention to energy stocks although the companies incurred substantial losses (they were down by around 30% at the end of May 2020). A year later, when the global economy showed signs of recovery, US energy stocks went up and even became leaders in terms of growth.
The purchase of problem assets is considered to be one of the riskiest investments. However, Sam Zell was never intimidated by instability, unlike many of his colleagues. He even invested in companies that were on the verge of bankruptcy. He always assesses what percentage of the issuer’s current potential has not been realized.
Indeed, you should have tremendous courage to pursue such a strategy. Firstly, you should possess great analytical skills. When you carefully study the company’s financial history, make sure it is risk resistant. You can afford to take risks only when seeing the firm’s growth potential.
If at least one condition is not met, there is no need to rush to enter the market. Remember that even those who give valuable advice can make mistakes, let alone newbies. This is what happened to Sam Zell. In 50 years of his trading activity, he made only one grave mistake, but he remembers it up to this day. In 2007, he invested in The Tribune, hoping to pull his famous trick. He intended to restructure the newspaper business, find a profitable tax loophole and improve the company's financial condition. Unfortunately, this venture ended in the bankruptcy of the firm.
As you can see, even the world's best traders can sometimes give bad advice. Therefore, everything you hear should always be analyzed. You should never use a professional's quote in your trading just because it sounds attractive. You should use it only if it works for you and your strategy.
We have prepared a list of universal and most useful trading tips for beginners:
Begin with a DEMO account
Before proceeding to online trading, you should test your strategy on a demo account. You will learn how to obey rules and make a profit.
Improve your skills
Before you start trading, it is very important that you study the trading platform. Beginners sometimes confuse buttons, which leads to silly mistakes. For example, they may open a short position instead of a long one.
Study analytics regularly
Newcomers usually focus on technical indicators. However, experienced traders say they should study analysis on a regular basis. Sometimes, this data is not in line with technical indicators.
Find your niche
The trader should understand what assets they know how to trade. Otherwise, you will just waste your time and money.
Be prepared to explain
Every time, traders open a position, they should clearly know why they do so. Experienced market players never rely on their intuition. They explain their choice based on technical and fundamental analysis.
Admit your mistakes
When traders press a button and enter the market, they take full responsibility for their decisions. In case of failure, it is solely their responsibility. Neither the broker, the market, nor the chance has anything to do with tham.
1. Shuruwat ke Liye Tehqeeq: Novice traders ke liye pehli salah yeh hai ke woh market aur trading ke baare mein bohot se tehqeeqat karein. Isse unka understanding level barhega aur woh trading ke mukhtalif pehluon ko samajh sakeinge.
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