HOW CAN I LEARN TO TRADE ON THE STOCK MARKET WITHOUT LOSING MONEY?

By Anurag Saboo, co-founder of BullBear

 

Learning to trade on the stock market is no easy feat. Before becoming successful traders, now seasoned investors will have often spent years (and lost cash) honing their craft. But in today’s world, there are ways that people can learn to trade without having to lose any money at all; and it’s far more sophisticated than reading out of date manuals.

 

1. Familiarise yourself with the market

Before you even start trading you need to understand the basics, such as what market you want to trade in, which stocks are the top performers, and what industries are thriving. The main types of day trading markets are futures, options, currencies, and stock markets. Within these types, there are groups of markets based on stock indexes (such as the Dow Jones, and the DAX), currency exchange rates (such as the Euro to US Dollar exchange rate), and commodities (such as gold and oil). Keep an eye on the stock market to familiarise yourself, taking note of the stocks that are increasing in value and those that are decreasing in value.

 

2. Keep an eye on current affairs and business news

What’s going on in the world will affect the profitability of certain stocks within a market. For example, COVID-19 has drastically impacted the travel and hospitality industry, meaning stocks like TUI and Expedia, which are travel-related, will have depreciated overnight. By looking at the current news you’ll be able to predict which stocks will be affected by current affairs. A very basic rule to remember is any negative news will initiate people to sell stocks. Negative news can include a bad earnings report, a lapse in corporate governance, big-picture economic and political uncertainty and unfortunate occurrences.

 

3. Consider a trading simulator 

You can find trading simulators online and on app stores. A trading simulator is a great way to learn how to trade because it allows you to invest virtual currency but on a real-time stock market, so you can see how your trade would’ve played out in real life. It’s also a great way to get used to the different types of markets and where you want to invest your money when you start trading on the real stock market. Trading simulators will not only teach you how to trade but also the extra costs involved, such as broker fees or commissions.

 

4. Keep practicing

Don’t be disheartened if you find yourself investing and losing virtual money in the ‘practice’ stage. This is what the simulator programmes are built for: the more you play the more you’ll learn. Many young investors who start out investing real cash will be spooked by the losses they endure in the first few phases. But unlike investment on the real stock market, you won’t be losing any money, meaning more investments, more learning and more preparation for when or if you want to start investing real money. Approach the simulator game as you would a real investment, making sure to research the markets and keep up with the current news agenda before choosing where to invest your virtual money.

 

5. Be aware of the risks

 When and if you feel confident enough to begin trading and investing real money in the stock market, you need to be aware of the risks. Start by identifying what your assets and liabilities are. What can you afford to lose? Make sure that you start with small sums of cash first to test the waters. Remember that no matter how experienced you are at trading, there are always risks associated with any investment and you might not get back what you spend. The official term for risks related to the stock market is ‘systematic risk’, which refers to factors such as economic growth, recessions, inflation, interest rates and currency fluctuations. All of these can have a detrimental effect on your trading choices so bear this in mind before you invest.

 

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