Entering the financial markets for the first time can seem like a daunting task. Getting up to speed on stock trading concepts, methodologies and portfolio building strategies requires access to multiple sources of quality education. Just like any of life’s major endeavors, trial and error coupled with the will to succeed are what eventually lead to triumph.
The good news is you don’t have to trade individual stocks to reap all the benefits of the equity markets. Stock indices like the S&P 500, DAX 30, FTSE 100 and Nikkei 225 provide you will all the exposure you’ll need to capitalize on the market.
If you’re a new investor, rest assured there is no time like the present to enter the markets. The growth of online financial trading means all the resources you’ll ever need are just a few clicks away.
If you’re asking, how do I get started as a stock index trader, these ten tips can put you in the fast lane to success.
- Open a trader account
The first step to entering the equity market as an index trader is to find a reputable online broker and open an account. A simple internet search will reveal the top brokers in your country. As a beginner, it’s important to look for a broker that offers free trading tools and educational resources. Many brokers offer demo accounts, which allow you to trade real market conditions without having to deposit any money. Think of it as a “practice account” as you learn the ropes.
- Learn the key concepts
What time does the market open and close? What’s a stop loss or take profit order? What’s the difference between a stock index and a futures contract? The answers to these and many other trading questions aren’t difficult to find. As a beginner, it’s critical that you learn as much as you can about the financial markets. This includes getting a good grasp of the terminology, as well as the key concepts.
- Read the financial news
Reading the financial news essentially means following the market each day. However, this goes far beyond just following the ticker. News sites such as Bloomberg or The Wall Street Journal serve as a great resource for investors looking for in depth coverage on the market. As a new trader, these sources can help you learn about the factors that influence investment decisions.
- Learn the basic charting techniques
It’s difficult to become an avid trader without a solid grasp of basic charting tools. Charts convey the price history of a stock or market over time. Charts can also be used to conduct technical analysis, or the study of past market data to determine future prices. Several charting platforms are available online for free. Your online broker will also have custom charting software you can use.
- Research before you decide
Whether you’re a beginner or a seasoned trader, always research before you invest. If you come across a trade you think might work, research it thoroughly before pulling the trigger. There’s no special formula for conducting market research. If you’re interested in a particular stock index, read up on how the national market is doing. For example, investing in the S&P 500 Index should lead you to consider the U.S. economy and key earnings of S&P 500 companies.
- Seek inspiration from the greats
Traders who dream of riches are encouraged to keep the fire alive by learning from the world’s most successful investors. Whether it’s Warren Buffett, Benjamin Graham, Paul Tudor Jones or John Templeton, the annals of history are filled with great investors. By studying their career, you can learn valuable insights about becoming a successful trader.
- Consider the various investment strategies
You don’t have to decide on a particular investment strategy right away, but it’s important to get exposed to them early on in your trading career. By exploring the various strategies, you can determine the right approach for you. This will take some trial and error, but the strategy you choose should ultimately match your goals, risk tolerance and availability. Traders come in various shapes and sizes, so there’s no one-size-fits-all approach.
- Learn risk management
Risk management is something every trader learns to adopt. In the investment world, risk management is the practice of ensuring your losses never exceed acceptable boundaries. It also refers to the process of identifying, analyzing and accepting a certain level of uncertainty in all your investment decisions. After all, no trade is 100% risk-free. There are several risk management strategies you can use. Your online broker also offers tools that can help you minimize your losses on any given trade. While you don’t have to apply this information right now, it’s important to familiarize yourself with the importance of risk management.
- Join a trading community
Although nothing beats having a mentor to teach you the ropes, joining a trading community is the next best thing. Joining one of these fraternities is easier and more common than you think. Online forums, social media groups and Meetup.com are great places to get to know (and learn from) more experienced traders.
- Never give up on your goals
Success in the financial market boils down to education, grit and determination. These are what give you staying power. It’s important that you reflect on your reasons for entering the market in the first place. Constantly reminding yourself of your goals will help you manage your trading psychology and keep you focused over the long haul.
While there are no guarantees of success in the investment world, these ten tips can help you get a good start. As a beginner trader, think of yourself as a sponge, and start soaking up all the quality content you can get your hands on.