How You Can Trade Stocks, and Make Money, Like the Pros

While anyone with a dollar and a dream can invest in the stock market, making money from the stock market can be a mixed bag. This is because some investors get caught in the ups and downs of a market that never lets up. As such, many investors, even professionals on Wall Street, can get caught in the emotional roller coaster which ends in being burned out.

However, this is one of the keys to trading stocks – recognize that the market goes up and it goes down and learn to live with it. Even if recent periods have been relatively calm, there is no guarantee that markets will not get roiled again.

Being prepared for the emotional roller coaster isn’t the only lesson you need to learn and here are some tips on how you can trade stocks, and make money like the pros.

It doesn’t matter if you are investing in gold or stocks, there are no guarantees when it comes to deciding where to put your money. If you are looking for a get rich quick scheme, then look elsewhere. Instead, this article will give you some of the best practices you need to make money while investing.

  • Time is Your Most Precious Resource

You probably did not expect this to be the first tip, but it is. As you probably know, time is the own resource you can’t earn back. When this comes to investing, in general, this means that you need to take your time to make the right decision.

In the stock market, this comes down to three factors. First, do you have enough time to review the stocks you are considering? If then answer is no, then you probably shouldn’t be investing in the stock market – at least not directly in stocks.

Second, have you built a model, and have you taken the TIME to test it out? Professional investors do not fly blindly into stock. Instead, do the research and then test out the possession they want to take based on different scenarios. Doing this helps them to determine if the risk is worth the reward and to set up their stop loss limit before they enter a position.

Lastly, you need to understand that investing in stocks is a time investment. Not only the time frame for holding the stock but also the time needed to perform the research and perfect your trading models. If you don’t have the time for this, then you might want to consider passive investing as an alternative.

Even before you start live trading you might even go to sites such as StockedUp. Sites like this will allow you to “take the investing skills quiz and test your trading skills.” This will help you to build your confidence before you start risking your own money on live trades.

  • Remember Rome Wasn’t Built in a Day

Professional investors rarely go all-in on a stock – largely because they know they can get wiped out in the blink of an eye. They know that Rome wasn’t built in a day and as such, they are willing to start small and then increase a position if and only if the market conditions warrant it.

You might think this is not exciting, but the truth is that investing in stocks is not for adrenaline junkies. Sure, aggressive traders might win big in the short-term but few of them have what it takes to last over the long run.

A good approach for those who are just starting is to pick out a basket of six to 10 stocks (preferably in the same industry) and then track their performance for a quarter or two. This will help you to become familiar with the trading characteristics of each stock and closely matches what analysts at investment banks do.

Remember to start small, get to know the companies and the industries you are focusing on and then build out from there.

  • Don’t Lose the Forest for the Trees

While it can be easy to get swept up in the movements of an individual stock, this can catch up with you in the long run. Instead, keep your focus on the industry or sector you are following and not the minute-by-minute movements of the individual companies.

This is not to say that you should ignore what companies in the industry are doing. However, tracking too closely what one company is doing can lead to myopia.  Instead, focus on your technical analysis of the industry and of the targeted companies within the industry. This will save you in the long run as your decisions will be based on the big picture and not the heat of the moment.