When it comes to classic forms of investing, the stock market always ranks near the top. It’s a traditional investment vehicle that allows anyone with moderate resources the chance to own portions of large companies and corporations.
But just because anyone can invest in stocks doesn’t mean everyone can be successful at trading stocks. If you want to increase your chances of being profitable, then you need to heed the following four tips.
- Consume, Consume, Consume
Before you ever invest a single penny into the stock market, you need to spend time reading books, watching videos, poring over blogs, attending seminars, and listening to what successful investors say. The more information and knowledge you can consume, the better off you’ll be.
Keeping this in mind, it’s always wise to wait before investing. If you decided yesterday that you want to trade stocks, you shouldn’t be investing money into the market today. As a rule of thumb, try to wait at least 60 to 90 days before taking action. This gives you enough time to learn about the intricacies of how it works and make sure you’re not just making a rash decision.
- Find a Mentor
“One of the best ways to streamline your learning is to seek out a mentor,” successful trader Timothy Sykes says. “This can be anyone who is further along in their trading career than you. Often, this individual will not only offer valuable insight, based on their own experiences, but can also guide you toward other resources that were helpful to them.”
In addition to having “book smarts,” you also need “street smarts.” This is where the value of mentorship comes into play. Many successful investors trace their roots back to an individual who helped them in their first days. Don’t assume that you can do it on your own.
- Mid-Afternoon is the Best Time to Trade
While there are plenty of traders who will disagree with this statement – adamant that early morning or late afternoon is better – mid-afternoon is the ideal time of day to be active.
“The best time to trade ‘at the market’ is usually in the afternoon, from about 1 to 2:30 p.m. EST,” says investor Richard Band. “By then, the whole country is at work, including the West Coast, and everyone has had a chance to digest the day’s important news. Market-shaking government statistics are almost always released in the morning. So are most corporate earnings reports.”
Along that same line of thinking, there are days when it’s best to buy and sell. Band says the best time of the month to buy is between the 18th and 22nd of a given month. “That’s when cash flows into the market (from pension funds and dividend reinvestment) tend to be at their low ebb, along with prices. The best time of the month to sell is during the first two and last two days.”
- Treat Trading Like a Business
The reason so many stock traders trudge along without making any real money is that they look at it like a hobby. They casually trade during their lunch break or only check in on the market when they hear rumblings on the news.
If you’re treating trading like a hobby, you’re going to find that it’s a rather expensive hobby. It needs to be treated like a business (even if you have another full-time business). Trading incurs gains, losses, expenses, taxes, and everything in between. You can’t afford to look at it as a side job.
Learn From Your Mistakes
Stock trading can open you up to a world of opportunities, if you let it. But at the end of the day, you’re going to make some mistakes. Learn from those mistakes and use them to push you forward.