Before I retired five years ago as a software engineer, I was interested in trading stocks and equity options. Two years ago, I started my quest to become a successful trader. I was able to purchase education programs and trade software, as well as attend many seminars, which promised to show me how to trade in both up and down markets.
Too many people have told me that trading the markets today is similar to gambling. They are right if you don’t know what to do, lack education, or just throw money at markets expecting to get rich. Knowing yourself is key to planning.
Become an entrepreneur not a gambler
Entrepreneurs who succeed have done their research. They’ve researched the market for their product or service and created a business plan detailing the goals and objectives of their business. They have created guidelines for controlling spending, profits margins, and losses. Trading is a business and not a hobby. The entrepreneur of trading is you. It and your money should be treated as a business venture with goals and guidelines.
Investor or trader
Find what best suits you. Traders are driven to get faster results. They are very disciplined and seek smaller profits and faster losses. Traders can be in trades for as little as a few weeks or even minutes. Are you an investor who is willing to trade in order to gain long-term appreciation? Investors typically hold stock, bond, or mutual funds for many years.
Share what you know
Warren Buffett and Peter Lynch are two of the most successful investors and money managers. They invest in what they understand. Both love consumer goods that have well-known names like Coke and Johnson and Johnson and Home Depot. Which areas are you most proficient in? What is your preferred career? Which stocks, commodities, and currencies are related to your business?
Select your market
Which market is most interesting to you? Learn how that market reacts to news events. You can trade on-line or through a brokerage firm in five major markets. These are stocks, stock options and futures/commodities. They also include currencies, bond markets, and currencies. These financial instruments are both dynamic and react to market conditions. You will need to take some time to get familiar with the trading instrument you choose.
Create your trading plan
Answering the questions above will help you to understand yourself and create a trading plan that will work for you. You can find many trading plans online. I have previously written about the value of a trading plan in an article called “Trading Stocks Online: The Value of a Trading Plan”.
Today’s trading markets require you to know yourself and be focused, educated, and disciplined in order to become a confident trader or investor.
