The stock market is hot right now, and it seems like everyone is ready to dive in and make money. You have probably heard stories about new traders who have taken small amounts and turned them into fortunes, but don’t be fooled – without proper education and a trading plan for beginners, these accounts are the outliers, not the norm.
That’s why we encourage you to take some time and dedicate yourself to education as you get into the market. If you work with successful professional tools, you can accelerate your learning curve and minimize your risk while setting yourself up for long-term financial independence. Now, let’s get to it!
6 Steps to Creating a Successful Trading Plan as a Beginner
One of the key things to remember when approaching trading as a business is that there is no one-size-fits-all plan. Your risk tolerance, market interests, and trading approach need to be comfortable in order for you to succeed. However, there are common denominator traits in almost every successful trader and trading plan, which include:
- Manage Your Risk:
First and foremost, this is what you should always be looking to do in any type of investing – but especially as a beginning trader. In today’s market, the conditions can cause new investors to be burned if you are trading with too much capital too quickly and entering into positions at high risk levels. Risk management will be intrinsically tied into most strategies, but eager traders often forget to ask themselves, ‘what can I afford to lose if this goes bad?’ while already counting their unrealized profit. In fact, we teach our students to never risk more than 1% of their trading capital.
- Treat Trading like a Business:
If you think that the stock market is just a casino or free money, you will be among the millions of people who contribute their money to winning traders. The same is said if you approach trading like a hobby. The easiest way to avoid this pitfall at the onset of your trading career is to treat trading like a business. Even if trading is going to be your side-hustle, you want to approach it methodically and with a plan. you wouldn’t start a business without a business plan so you shouldn’t start trading without a trading plan.
- Start with Small Trades:
Before you start trading live we recommend paper trading. Once you start trading with real money you should not risk more than 1% of your portfolio. We recommend that you can start by risking even less than 1%. Starting small will give you the opportunity to trade live, which is very different to demo trading from a psychological perspective. Having practised with demo trading to begin with, you will easily be able to see where you are falling down when you go live. The best thing you can understand about the market is that it rewards patience and there will always be more opportunities – unless you overextend yourself early.
- Learn to Take Profit and Cut Losses:
One of the most difficult components of trading and investing is when to buy and sell. This sounds so elementary, but when you are in the midst of a trade and a stock is rising, it’s easy to think “why would I sell, this will continue to go up?!” Conversely, traders often get attached to a bad trade when it starts to sink, and dig themselves into deeper holes. Taking profit, cutting losses, and understanding that not every move has to be a home run to be considered successful is a key lesson in your trading career. Mastering risk management is vital.
- Dedicate Yourself to Education:
This is why we’re here, isn’t it? The notion that you can self-teach your way to profitability has led many to throw their money away. That’s not to say it is impossible, however how good is your teacher if you are self-taught? Learning from professionals who have created highly successful trading systems is going to be such an easier way to gain entry into a powerful market. What we have found is that the best traders are able to learn and adapt to all market conditions and continue to gain an edge in a very competitive environment.
- Consider Non-Market Factors in Your Plan:
When setting up any business, your product isn’t the only thing that determines how you operate. The same is true for trading. You need to create hours, make sure that you are properly equipped to manage it, and figure out how to pay yourself. In trading terms, this means you need to align your schedule with the markets and types of trades you want to take. Similarly, it means not letting trading stress you out too much, impact your health and fitness, sleep schedule, or family life. Passion and dedication are necessary to make any endeavor work, we advise maintaining a healthy balance so that your trading can be sustainable for life.
When it comes down to it, the more structured of an approach you apply to your trading style and career, the higher chance of success you will have. We love to see when people realize that the stock market can be a vehicle to financial freedom that is rarely available in other places. The best way to give yourself a pathway to this freedom is with a solid plan.
Start Your Day Trading Education with StockAbility™
At StockAbility™, our goal is to educate, empower, and support our members to have sustainable financial freedom. The beginning of a trading career can be the most stressful and volatile, which is why our team of experienced professionals has created courses to guide you through the early stages. If you are looking to minimize stress and maximize your profits, we have the tools to help.
If you are looking to take your day trading education to the next level, please reach out today. We’d love to get you into a webinar, coaching session, or high-return course today. That way, you can have a brighter financial tomorrow.