Learn To Trade The Stock Market

Most people who are investors are always lured into wanting to learn to trade. After all, you hear about people all the time who make millions trading the market. How do they do it? How did they learn how to do that, and what is the secret?

There is no secret. There is no holy grail that will take a novice and hand them millions in profits with ease. This does not stop people from trying to find the perfect indicator, perfect trading system and other stuff like that. When just starting out, its natural to need a "crutch" to lean on to help you because it all seems so confusing. And it is confusing. So the natural inclination is to try to find or create an indicator that is never or rarely wrong. "If I can just figure out the perfect entry, I have it made."

This is the start for the search for that holy grail. But, I will let you in on a little secret - even if you found it, you would probably still lose money. How could this be? Easy, let me explain. You might be able to call most of the turns in the market BUT you cannot predict the magnitude of the move. Do you hold for 0.20, 0.50, 1.00, 2.00 etc... A 5 point winner and at 0.75 max winner both look identical in the beginning. A 5 point winner may push 0.75, then sell 1.50 down to the point where you are at a loss, then push all the way up and go big. There lies the problem. A 0.75 winner will only go that much IN TOTAL, then it sells down and goes maybe 3pts down to probably stop you out. How can you tell the difference - you really cant most of the time. So trying for 3.00, you get .50 then it sells down, trying for 1.00 it goes 1.00 then runs 5pts more. Once you are in a trade, all you can do is manage it - you have no power over how far it goes.

Any of these scenarios you can see the outcome: You cannot predict the outcome - the only way to get ahead would be to have the skill to read how its trading and use judgement to consistently win and get ahead. Notice - none of winning comes from the perfect entry - its all in the skill and knowledge of the exit. Now, that does not mean a crappy entry is ok, it sure helps to have a great entry, because your risk (dollar loss) is far less if you are wrong.

The proper way is to throw out that idea that a perfect indicator or tool exists. Learn to find decent entries and to really concentrate on trade and money management AFTER you are in the trade. This is what differentiates the winning traders from the losing traders. There is a lot to it, but that is it boiled down to the simplest concept - its all in money management and exit management. You will be much better off and in a better frame of mind as soon as you realize that tools only help you filter ideas that you find, not create ideas that you dont know exist. The best way to do this is to learn how to read price charts and use technical analysis to help with the timing.

These days, its easy to try your hand if you think you want to trade the markets. Most brokers now have simulation accounts that will allow you to try techniques out without actually risking any real money. Granted, you also dont have the emotions involved either, so you have to keep that in mind. Anyone thinking of trying to trade, whether it be day trading or swing trading - see if you can be consistently profitable for at least 2 months on a simulator. Make sure you trade the same size AND use the same types of stops you would use if you were actually doing it. If you can get the consistency down, perhaps you can attempt to trade with real money. Also, you should only trade with money that is considered risk capital - meaning if it were gone tomorrow you can still pay all the bills, no hardship would ensue. Also, you should consult a qualified financial advisor to make sure whatever you are contemplating is actually suitable for your financial condition.