What Do You Wish Someone Told You About the Stock Market When You Were in Your 20's?
If you are a beginner and new to the stock market, then this post is for you. Learn about the 3 things that you should keep in mind when you first start out trading.
Published July 8, 2021.
I started looking into several markets at a very young age, with little to no guidance from any mentor, and when very little information was being offered in books and other sources.
I found them fascinating, and I was intrigued by the amount of money circulating in such markets. So I delved into them with little to no knowledge. Needless to say, I lost money.
Therefore, If I could go back and talk to my 20-year-old self, I'd advise him the following:
First thing, take things slow, don't rush the process. It's easy to be consumed by the enticing thought of making a quick buck, but an empire has never been built in a day. There's no doubt that the stock or crypto market can fulfill this desire. However, it takes time to master and build up your account.
Keep in mind that it takes approximately 2 years to fully understand how the market you are interested in works. Therefore, it is best to take your time and learn as much as you can.
Analyzing and Timing is Important
Most importantly is timing. There is a time to be in the market and there is a time to be out of the market. Some traders see a bullish move on a particular stock, and because they don't want to miss out, they jump in without making the needed analysis. They might make money, but more often than not, they end up losing, thus leaving them with empty accounts.
The best time to buy is when the current stock is undervalued and has a potential for higher future prices.
The following are some of the indicators I check that gives me a basic sense of the health of a stock:
- The P/E(price to earnings) ratio.
- The earnings per share.
- A comparative valuation of the company whose stock you'd like to purchase with a competitor's.
- Look out for news events such as mergers, financial reports releases, news of bankruptcy, etc. Generally, any information, good or bad, may impact the company's stock value.
Don't ever overtrade. This puts a trader under enormous risk exposure in the market, which can be extremely volatile. One moment you have money, and the next, you have none.
These are truly just the basics. Don't go mad on the market; you could lose all of your money at the snap of your fingers. Take your time, learn the rules, apply the rules, and see how you make money.