5 Share Trading Tips for Beginners

Before jumping straight into trading shares, it's a good idea to study up on the essentials. After all, it's your money you're putting at stake as you expect an eventual payoff at some point down the line (if you're in it for the long-term, this could be anywhere from 2 to 10 years or more). 

Indeed, share trading for beginners has certain pitfalls you need to be aware of. To make the most of your initial attempts and make the transition to the world of trading easier, we're about to give you some essential beginners share trading tips. 

1. Don't bite more than you can chew 

In other words, it's better to start small when you're just starting out. To get comfortable, invest smaller chunks of money, at least in the beginning. You may even want to consider gaining some first-hand experience by trading in a market simulator before investing any real money. In essence, the simulator behaves exactly like a real-world market does, minus the risk. At the same time, this provides a realistic environment where you can put your knowledge to the test and helps you build up the confidence needed to transition to the real thing. At the end of the day, it's easier to experiment and make bold decisions when you're not under so much pressure. 

2. Be faithful to your strategy 

One of the most essential beginners share trading principles is to develop the right mindset that involves sticking to a pre-determined strategy. This will keep you from making decisions that are based on your current emotional state. Know that not even the most experienced traders have the ability to forecast everything in advance, but the difference between a beginner and a professional is that the latter will not abandon their chosen trading strategy even if the current market circumstances aren't the most favorable. The last thing you should do is to start panic selling your shares if there's a sudden dip in their market value. Remember, you're in it for the long-term. 

3. Don't be afraid to shop around when choosing a broker 

Prior to signing up with the first broker you happen to come across, shop around for a bit to find the one that gives you the best deal. However, don't make the mistake of thinking in terms of commissions only. Share trading for beginners often comes down to the user experience, so give preference to the ones that take you by the hand and provide educational materials that explain complex technical terms in an easily-digestible manner. As an example, ThinkMarkets has published a useful guide where you can learn the essentials of buying and selling shares that describes the step-by-step process from A to Z without leaving anything out of the equation. Don't forget to read user reviews as this is likely to steer you in the right direction. 

4. Diversification is key 

Although it may sound counter-intuitive at first, diversifying your portfolio rather than pumping all of your funds in a single share is actually less risky. For example, if you choose to spread out the risk between hundreds of stocks, it doesn't matter if several of them go down. In the end, if you've managed to place the majority of them right, you'll end up as a winner. This strategy will also discourage you from over-focusing on any particular stock and psyching out when things don't go as intended. Even as a complete beginner, not placing all of your eggs in one basket is synonymous with playing it safe(er) in this volatile and often unpredictable environment.

5. Don't trade without a stop loss 

The final beginners share trading tip we have in store for you is to never trade without the stop loss protection mechanism. As the name implies, this is an essential safety measure that will reduce your losses if the share you've chosen drops too much in value by automatically selling it off at a pre-determined price point. To give an example, let's say you've entered the market when the prices were $50 per share. Naturally, you expect them to go higher, but in case you get it wrong, you can set the stop loss safety net to fire off in case the share dips to $45. In your early days of trading, this will give you the much-needed confidence, knowing that you won't be heading into a complete financial disaster no matter what happens. The good news is, most, if not all modern trading platforms support this functionality. 

Conclusion 

As a complete beginner, the notion of putting your hard-earned money at risk can be downright daunting. By understanding that share trading is all about taking calculated risks, you'll be able to keep your expectations realistic and go at it from a rational standpoint. With the help of these tips, you now have the most crucial bits and pieces of information necessary to help you get started.

Disclaimer

This is general information. Do not make financial decisions without first obtaining advice from a licensed professional