A Beginner’s Guide for Buying and Selling Stocks

Published : 1 month ago, on 12/08/2024

The mechanical action of buying and selling stocks in the 21st century is as simple as it gets. You just find the right site or app, browse the stock you want to buy or a stock that you own, and click the Buy/Sell button next to it.

So, when we say that someone wants to learn how to buy and sell stocks, it’s clearly not what they mean.

What they actually mean is that they want to learn how to make money doing it. They want to make the right calls when buying and selling stocks, so here are a few tips to help them get there in no time. 

1.Choosing the right stock broker

You cannot play any sport before you find the right court and pick the necessary equipment. Well, when it comes to investment, this first step always lies in choosing the right broker. According to Techopedia specialist Kane Pepi, this is said to be simpler than ever before.

With so many users and reviews out there, it’s impossible for these reviewers to hide all their flaws and imperfections. This means that all of their faults are fleshed out, but so are their strengths. It’s up to you to pick a credible source of information and compare some of these brokers in order to pick one that would suit you the best.

A review list is the best start, but you might want to dig a bit deeper into the platforms that make up your short list. 

2.Picking the right investment

Learning how to trade stocks is simple. You just pick a broker and find the big “BUY” button. Learning which stocks to buy is what’s difficult. 

It’s never about the stock itself, it’s about the company behind it. Before you invest (buy stocks), you need to learn how to recognize a company with potential (or one that just appears to have it, which means that you should drop it like a hot potato). 

Always look at the potential growth in the long run, and learn how to expand your field of view beyond just the company. The health of the market matters just as much. 

3.Diversify your portfolio

Never keep all your eggs in a single basket. No matter how appealing a certain stock appears or how certain you are that the company will explode, you should always resist the temptation to overcommit. 

Instead, spread your investments across various stocks. It’s even better if you spread your investment funds over multiple asset types. Simply put, you need to learn how to diversify.

Now, the smaller the correlation between your investments, the better the diversification. This may sometimes feel counterintuitive, but the reason behind it is really not that hard to understand. Even if you can’t understand it, just remember that so many people do not do it without a good reason. 

4.Setting the right mindset for trading

The next thing you need to keep in mind is the importance of understanding the psychological phenomena behind these trades. You see, when talking about investment, the majority of people assume we’re talking about math or economy. In reality, there’s as much psychology here, as well.

Psychological phenomena like FOMO or sunken loss fallacy are just some of the factors that may affect your decision-making process. Now, the best way to become more resilient to them is to become aware of their effect on you. You cannot avoid a trap unless you know it’s there. 

So, read up on psychological influences that affect your trading in order to recognize them and minimize their effect. 

5.Simulation before using real money

As a 2024 investor, you have the privilege of using simulations before having to resort to real money. Almost every trading platform out there gives you a chance to conduct such a simulation. For them, it’s a sort of trial period that can get you hooked to their platform without them having to give you real credits to spend. For you, it’s a learning tool.

At the same time, no simulation is ever as good as the real thing. Feeling the pressure (the weight) behind your decisions is what makes investment so difficult. At the same time, mistakes made by investors are expensive, so if there’s a tool that can help you test out some ideas without exposing yourself to unnecessary risk, it might be wise to take the opportunity. 

6.Picking a strategy

In order to trade more systematically, you have to pick a strategy. Regardless if it’s dollar cost averaging or something else a strategy gives your investment activities a necessary structure.

A strategy is also an important psychological safeguard. Changing the way you trade too often will make you lose direction. It’s even worse if you change your approach and figure out that the previous one would yield a better result. The effects of this on the psyche of a new investor could be devastating.

Having a strategy will make you act more like an investor and less like a risk-taker. Remember, there’s time and place for everything, but if you want to take risks with your own money, you can just go to one of those anonymous casinos instead of being here. 

7.The imperative of starting as soon as possible

There’s this thing called the concept of compounding returns, where the sooner you start investing, the more money you accumulate in the process. Over the course of years, this can amount to significant wealth, especially if you postpone the process for a few years. 

Also, keep in mind that with every trading action, you learn something new or cement some old knowledge. Again, the sooner you start, the sooner you will acquire this critical amount of knowledge/experience. 

8.Importance of continuous learning

The more you know, the better your investments will be, and we’re not just talking about the particular assets that you plan to invest in. The world of investment is an organism, where each part relies on another to survive. Even if you were to learn something about accounting or open banking challenges, this would still benefit your overall investment portfolio as a whole.

Still, when learning, it’s always better to assume a more systematic approach. 

Start with the very concept of trading, proceed with the assets that you’re most often trading in, and finish by identifying investment courses. Like every good investor, you might want to set aside a bit of a budget for these courses.