Stock Market Basics: Playing the Market in 11 Easy Steps

Here’s how to play the stock market in 11 steps:

  1. Risk and Mental Control is a must to play the market
  2. Choose the right broker for you to play the stock market
  3. Get to know key stock market terms
  4. Study stock patterns. They repeat themselves
  5. Do not use leverage
  6. Trade volatile stocks to play the market
  7. Create a stocks watchlist
  8. Improve your stock market skills with paper trading
  9. Learn from your mistakes to play the stock market
  10. Master your analysis skills and learn how to analyze stocks
  11. Never stop studying and learning about the stock market

This whole trade life style can seem very cool, a short phantasmagoric, and overwhelming all at once … particularly when you realize how a lot there is to learn, right ?
even my most successful students started their journeys knowing nothing about trade, then they began learning and everything changed. * * Once you start to build knowledge it opens your eyes to the world of possibilities .
Let ’ s catch started with some stock market basics.

The stock market refers to a secondary market where buyers and sellers come together to deal in company shares. In a junior-grade market, you don ’ t buy shares from the company. rather, you buy from an existing owner of the stock .
A stock exchange is the basic trade facility or platform. In the character of the NYSE, traders still execute trades on the deal floor. The Nasdaq is unlike in that it ’ s an electronic exchange. But in both cases, the exchange is used to buy or sell company stocks and bonds .
Traders and investors buy and sell stocks listed on the exchange. Stockbrokers make this possible by executing trade orders .
now you know what the stock market is … but what about investing in the stock market?
Some people contact me and throw that ‘ playing the market ’ phrase around like this is a big game. I suppose you could look at it that room, but prepare to lose your ass if you don ’ t take this ‘ plot ’ seriously .
Others send tweets or emails oozing with apprehension and fear. They seem outright scared to play .
here ’ s the thing : Whether you ’ re on the side of reverence or you think it ’ s all a crippled … it ’ s all about perspective .
The degree I ’ megabyte trying to make is this : You can learn to trade as long as you start at the beginning with stock market basics and build a base of knowledge. It ’ s precisely what I did back in the day. And it ’ s what all my successful students like Mason Fecht ( Have you heard about this guy however ? He ’ south crushing it ! ), Tim Grittani, and others did .
now it ’ s your turn. Let ’ s prima donna in …

board of Contents

  • 1 What Are The Stock Market Basics?
    • 1.1 Who Can Be a Stock Investor?
    • 1.2 Importance of Being Prepared for Stock Market Challenges
  • 2 How To Play the Stock Market in 11 Steps
    • 2.1 #1 Risk and Mental Control Is a Must
    • 2.2 #2 Choose the Right Broker for You
    • 2.3 #3 Get to Know Key Stock Market Terms
    • 2.4 #4 Stock Patterns Repeat Themselves
    • 2.5 #5 Do Not Use Leverage
    • 2.6 #6 Trade Volatile Stocks
    • 2.7 #7 Create a Watchlist
    • 2.8 #8 Paper Trading
    • 2.9 #9 Learn From Your Mistakes
    • 2.10 #10 Master Your Analysis Skills
      • 2.10.1 Technical Analysis
      • 2.10.2 Fundamental Analysis
    • 2.11 #11 Never Stop Learning
  • 3 The Bottom Line

What Are The Stock Market Basics ?

First things first. You have to understand banal market basics concepts. Without foundational cognition, you ’ ra toast .
When you buy shares of stock you ’ rhenium buying into the company. In early words, at some point, the company decides to raise capital to invest in company growth. It may be for research and exploitation, market, or evening machinery, but the capital is meant to bring return on the investment .
To raise the capital, the company creates shares and sells them in an initial populace offer. then those shares are traded on the ‘ stock market. ’ It could be the Nasdaq, the NYSE or the OTCBB ( which is considered ‘ off exchange ’ ) .
so, for exemplar : company X sells shares … shares are available to buy or sell on an exchange .
adjacent, you need a stockbroker. Your broke executes your trades. When you instruct them to buy, they ’ ll bribe at the best price available depending on your instructions. Brokers must meet certain professional standards set by the Financial Services Regulatory Authority ( FINRA ) .
What else do you need ? A brokerage house report. Your broke will help you create one. Or, if you use an on-line brokerage house and trading chopine, you create it, then transfer money into it, and then you ’ re off .
But hold on. There are some other things you need to know properly away …
Say you put in an orderliness to buy shares. That ’ second called a bid. person else owns the breed already. They may be asking for a specific price. That ’ second called the ask. A buyer makes a command ; the seller asks for a price .
The opening between necessitate and wish is the spread. The bigger the circulate, the lower the number of shares that will trade. The closer the spread, the easier it is to buy and sell … because there are sellers and there are buyers and they aren ’ triiodothyronine excessively far apart. Cool so far ?

Who Can Be a Stock Investor ?

It used to be unmanageable for the average person to be a stock trader. nowadays, anyone with a computer, high-speed internet association, a brokerage account, and a deal platform can do it .
But before you dive into getting a crowd of satiny trading gearing, let ’ s talk about getting yourself disposed first gear .

importance of Being Prepared for Stock Market Challenges

There ’ second this celebrated quote by Abraham Lincoln. It goes like this : “ Give me six hours to chop down a tree and I will spend the first base four sharpening the ax. ”
You need to be prepared for challenges when you start trading. There are up days and down days. You ’ ll have wins and losses ; sometimes both on the lapp day. You ’ ll probable learn some hard lessons .
The best way to ease into a trade career with less pain ? Preparation. Like Lincoln said, sharpen your ax. Study, determine, practice. Apply for my trade challenge if you want to be part of a community of traders learning and growing every day .
now I ’ ll share 11 steps that are key to gaining a stock market basics education. Some other teachers won ’ thyroxine state you some of these things ( at least not until you ’ ve paid them big bucks for their latest run ), but I ’ megabyte going to tell you up front because I want you to start preparing right away — nowadays .

How To Play the Stock Market in 11 Steps

sykes studying on laptop

# 1 risk and Mental Control Is a must

This is so significant that it has to be number one. Without knowing your risk tolerance and without knowing how to exercise mental control, you could lose big time .
You could do everything else properly and at the last second base cross your risk boundary and have it all go down the tube !
Let ’ s start with hazard. In any stock marketplace bring, the risk-to-reward proportion is the level of hazard you ’ re will to take, compared to the potential rewards. I teach students to set a risk level before they enter a trade. I show you how to determine that level in my free Trader Checklist path .
once you set your flat of gamble, you have to maintain mental control. If you set a target and the trade is going well, once the target is met, close your position. Why ? Because this is exercising genial discipline .
The same goes for trades gone incorrectly. Once you hit your loss limit, close your position. Don ’ t hope the trade will turn back around !
A bang-up means to keep track of risk and mental operate is by using a trading journal. You seriously need to do this. I show you how in this deal journal guide post .

# 2 Choose the Right Broker for You

Watch this video on YouTube
The broke you choose has a lot to do with your investing or trade strategy. other things to consider are fees and commissions .
There are a short ton of brokers out there. As a trader, I look for brokers to meet very specific needs. Over the years I ’ ve been through dozens of brokers. I ’ ve pretty a lot tried them all .
different brokers have different rules and unlike minimums. Depending on where you live there might be different rules angstrom well. Say you ’ re learning how to trade the store grocery store in India. Well, the brokers and stock market basics rules there might be different .
Check out this post about choosing an on-line agent to get an idea of some of the possibilities and learn about the brokers I use.

# 3 Get to Know Key Stock Market Terms

Bull grocery store, behave marketplace, earnings releases, dividends, volatility … the list goes waaaay on .
The stock commercialize has its own linguistic process. You must know key stock market basics terms. here ’ s a short ‘ scratch the surface ’ list of definitions to start with now. For a more in-depth list, check out 37 stock market terms that every trader should know to succeed .
Learn them. Study them. Every day. You ’ ve got tantalum know this slang like the back of your hand .
Bear market : When major indexes drop 20 % or more from holocene highs, it ’ s a sign of a bear grocery store
Breakdown : When a banal break below the previous lows. This could be daily, weekly or tied 52-week levels. Breakdowns tend to keep going lower because, theoretically, there ’ mho bad news about the stock .
Breakout : A break happens when a stock breaks above previous highs. Again, this could apply to daily, weekly, monthly, or 52-week levels. Breakouts tend to keep going higher for the lapp reason breakdowns tend to keep going lower : newsworthiness .
Bull market : When major indexes rise 20 % or more from recent lows, it ’ s a sign of a bull commercialize. We ’ ve been in one of the longest taurus markets in history recently. Some pundits think it ’ mho about to end. We ’ ll see .
Market correction : When the major indexes drop 10 % from holocene highs, it ’ s a correction. It ’ sulfur much considered positivist because it gives time for a period of consolidation and prepares the market for the following advance .

Watch this video on YouTube
Quarterly earnings release : This is significant for both traders and long-run investors. When a party releases its quarterly tax income and earnings per parcel you can tell how the company is doing. Earnings can be a potent catalyst for big price jumps. As a trader, that ’ s highly valuable information .
Dividends : Some companies pay dividends to shareholders. Others invest profits back into the ship’s company. This creates two categories of stock : dividend stocks and growth stocks. More established companies sometimes pay their shareholders dividends on a regular basis .
Bid-Ask Spread : As I explained earlier, ask is the price a seller wants for their shares. Bid is the price a buyer is will to pay. The bedspread is the dispute .
Short : You know the phrase ‘ preceptor ’ thyroxine sell yourself short ’ ? Well, that doesn ’ t inevitably apply to penny stocks. short-change betray is my all-time darling trade scheme. Going short-circuit means you bet on a stock going lower .
Long : Going long means you bet on the stock price going higher. Breakouts tend to keep going higher because, theoretically, there is good news .
Trading platform : technically, this international relations and security network ’ t a ‘ stock marketplace ’ terminus. I included it because without a deal platform you can ’ deoxythymidine monophosphate trade. I use — and recommend — StocksToTrade. I was part of the development team. We created it because we wanted a platform that does everything you need it to do all in one seat. It seriously kicks fuck .
Volatility : I ’ ll get more into this in footfall # 6. excitability is the deviation in monetary value between a low and a high for a stock within a given period ( normally a day ). In other words, it ’ s the come of price swing. I like excitability. It allows me to look for certain set-ups and patterns I know can be profitable .

# 4 Stock Patterns Repeat Themselves

One of the things I learned early in my stock trade career is this : Patterns repeat themselves in the stock market. Patterns that were happening 20 years ago are inactive happening !
sometimes things switch based on market sentiment and the economy, so you ’ ll have to adapt your style to the types of trades available. But you keep the cognition of what you ’ ve been doing because it will likely come back at some point .
An case of this is my experience back in 2000. I had been trading for around two years when abruptly the type of trades I was playing stopped. The technical school burp was about to burst and the frame-up I was using plainly weren ’ thymine appearing .
What did I do ? Did I try to force trades ? Hell no ! I took a step bet on and started studying again then I could figure out a new strategy. I looked for new patterns. It ’ s all chronicled hera in my rid script : “ An american english Hedge Fund. ”
I teach my trade challenge students all of the patterns I use. You can besides find a batch of data about patterns on my YouTube channel .
You don ’ t have to learn them all at once. As a matter of fact, I recommend you only use a few at first .

# 5 Do not Use leverage

This is highly important : Do not use leverage .
adenine soon as you open a trade bill your broker will ask you if you want a margin report. Unless you very, very know what you ’ re doing and need a margin bill for short sell, say no !
trading with leverage means you make trades with borrowed money. Start with $ 25K … adopt another $ 25K … and you have $ 50K to trade with. Sounds exciting, right ?
But what if you make a craft and lose $ 40K right out of the gate ? That ’ sulfur correct, your broker will call you and ask for enough money to cover your margin. It ’ south called a margin call ( another term to know ). That means you have to come up with another $ 15K equitable to break even. Ouch .
And it only gets worse as your bill grows. Don ’ metric ton do it .
rather, learn to trade the right field means. Learn to mitigate risk and stinger losses quickly. Learn all the ideas I ’ ve been trying to teach you for however retentive you ’ ve been reading my posts, watching my video, and learning my strategies .

# 6 Trade Volatile Stocks

I touched on volatility a little already. I love excitability. It means there are buyers and sellers and prices are going up and devour. The reason I love trading penny stocks is because of the extreme volatility combined with big percentage moves !
In early words, if a stock is trading for such a first gear price, say $ 1 per share, then a 20 cent act is 20 %. That ’ s huge. You aren ’ metric ton likely to find that even in most small-capitalization stocks, and surely not in large-caps .
Volatility might seem a little scary at first, but learn to embrace it. One manner to learn about the volatility of a especial stock is to …

# 7 Create a Watchlist

I recently wrote a station about how to create a watchlist. Whether you want to trade or you ’ re a long-run value investor, you should constantly have a watchlist .
You need to do your homework about the stocks you want to buy. Period. Would you go buy a television or smartphone without learning something about it ? Some people do. But I wouldn ’ metric ton .
thus create a watchlist. I’ll even give you my own watchlist every Sunday! That can help you get started .

# 8 Paper trade

When you paper deal, you make complex number trades and the software treats it as if it were a real trade. Your score goes up and down merely as it would in real deal — but you ’ re using talk through one’s hat money .
Paper trading is awesome and I hope you do it ( StocksToTrade offers composition trade ). Use your newspaper trade time to learn your set-ups and burn the cognition into your mind .
Remember what Lincoln said : Sharpen your ax .

# 9 Learn From Your Mistakes

Learning from your mistakes is key to success in any sphere of biography, right ? When it comes to trading it can mean the difference between rich and an empty account. If you make a trade and it goes wrong, don’t just forget about it and carry on!
alternatively, examine the setup, look again at the news, see if you had the right submission point and passing charge. In early words, use it as a tool for learn .
I can ’ thyroxine use the phrase ‘ catch rich quick ’ or my lawyer ’ s head will spin around all Exorcist-style. So I ’ ll say this alternatively : If you want the key to getting ahead in this game, learn from your mistakes .

# 10 Master Your analysis Skills

tim sykes grand canyon
One of the basics of investing in the stock market is to understand how to analyze stocks .
You have to be able to look at a chart and see what ’ sulfur going on. You need to know why things are moving — or at least have an educated guess .
There are two independent types of analysis. Which you prefer depends a set on your strategy. But you should learn both if you ’ re unplayful about trading or endow .

technical psychoanalysis

technical psychoanalysis is all about reading malcolm stock charts and using key indicators. You ’ ll learn about things like moving averages, digest and resistance, and pivot points .
For most patterns I trade I don ’ t use more than a few cardinal indicators combined with identifying a catalyst. A catalyst might be something like a wardrobe release or earnings announcement .

fundamental analysis

cardinal analysis is more concern with the underlying fundamentals of the company .

  • What is their revenue?
  • What’s their earnings projection?
  • How much debt do they have?
  • What is their growth projection?

These things can affect stock price. long-run value investors normally focus on fundamentals. I focus more on the technical side .

# 11 Never Stop Learning

As you can see, there ’ s a bunch to learn — and I ’ ve scantily scratched the come on .
I suggest you go through each of these 11 steps and see what you can do today. Start a watchlist. Begin to identify your risk tolerance. Search for data on stock analysis. Get a notebook and start keeping chase of what you learn .
Consider this trench work. Set aside time each day to focus on learning. No distractions. Step away from sociable media, the television receiver, your phone. Take notes. Keep build cognition .
You might be amazed at how fast some of this starts to make common sense. You ’ ll besides discover where your cognition gaps are .

The Bottom Line

I hope this helps you start nowadays, veracious now, to create the stock commercialize basics habits that all my top students have.

I besides hope you understand you have your work baseball swing out for you. You can’t cheat success .
With that in beware, why not apply for my trade Challenge ? It ’ s a complete concentration in everything you ’ ve equitable read and far more .
Are you a trader? Or do you want to be a trader and this is all brand new to you? Comment below. I want to hear from you!

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