At the start of your trading journey, the beginning will always be the scariest. You will probably look for articles online, usually with taglines like “Investing 101,” “Stock market terms,” “How to start investing,” etc. Others might even ask their trader friends: uy paturo naman mag stocks, san maganda mag invest? Some like to practice before actually investing real money into stocks because they’re afraid to lose money. With so many virtual trading services, like our very own VTrade, so many people have started to practice stock trading in risk-free environments—and that’s great!
But whatever you do to prepare yourself before entering the stock market, everyone has to go through one specific process to actually begin trading the stock market. You have to invest hard-earned money. It’s scary, and there’s no reason not to be. Many often say: Paano pag nawala yung pinaghirapan kong pera? Nakakatakot naman, baka malugi ako.
The risks are real in trading stocks. There’s no guarantee that the whole of your money will stay intact. But let’s face it, no reward will ever come without risks. No matter how much you study, or practice trading through virtual trading, nothing will ever be as real as actual trading. A wise trader once said:
No matter how many times you tell a person not to touch a cup of coffee because it’s hot, that person will never truly understand what it means to get burned until they try it.
It doesn’t matter whether or not you lose money. What matters is that you learn from your mistakes. Only miss market herself can teach the much-needed lessons. That said, here are a few things that should help you become more prepared as you start your trading journey.
Why is trading itself different from virtual trading?
It’s hard to imagine, but a lot of people who trade so well virtually don’t have the same success in real life. In fact, we know one person who gained over 50% in her Investagrams virtual portfolio but ended up losing 15% in the real markets.
Using simulated trading to practice can be good to help you become familiar, but the real lessons are in the stock market itself. What newcomers miss out on when they use simulated trading to learn are many small things – Market hours, Liquidity, and Order types. Most importantly, emotions are not there in simulated trading.
The little things you’ll learn when you start your trading journey
The small things can seem unimportant at first. But getting used to them will help you avoid certain risks. Especially in the stock market, you must always do whatever it takes to help yourself.
Market hours
This one may be useful to some, and troublesome to the rest. The markets (except for crypto) aren’t open all the time. For example, the Philippine Stock Market is open from 9:30-12, and 1:30-3:30 on weekdays. To effectively trade and monitor your stocks, you have to allot time to watch their prices. This can be very hard, especially for students and employees. You’ll find out that missing big moves can be very frustrating. Those who miss out are usually full of regret and frustration. This is why traders need to understand that they have to incorporate their trading with their everyday lifestyle. Some purchase services, like our own Prime subscriptions, to optimize their time. You need to figure out what works for you. Frankly, only actual trading will help you realize what your needs are to succeed.
Liquidity
Liquidity is a very important aspect of trading. It is the volume or the number of shares being traded. It’s possible and very likely that you’ll have delays or other issues when filling your orders. When a stock has no more buyers, traders are forced to sell at a lower price. This is called the bid/ask spread. If a stock’s last traded price was 6.8 and the next highest bid is only at 6.5, you can only immediately sell at that price. You can send an order to have it sold at 6.8, but if no one ever bids up to your selling price you won’t be able to sell at that price. Healthy volume is needed to ensure the safety of your position. As you progress, you’ll learn more and more that the behavior of liquidity can also give you hints as to where stock prices might head.
Order types
Knowing the different order types could help you a lot, especially if you don’t have all day to post your orders. The usual order type used by traders are day orders, which are bids/asks that expire within the day. Then there are also Good ‘Till Cancelled orders or GTC orders. This kind of order could help you spend a lot less time looking at charts. If you want to buy a stock at its low, posting a GTC order could be an alternative instead of posting the usual day order every day. EOD orders, or end-of-day orders, are only completed at the last few minutes of trading. These are usually done in order to ensure that the stock has been moving in your favor and stays its course throughout the day.
Trading psychology
More than just learning the technical side, as you progress in your trading journey you’ll start to learn that one’s psychology plays an important role. Some traders fail because they can’t get a grasp of how the markets move. Others, on the other hand, fail because they couldn’t master their emotions.
One important factor to consider when handling emotions is the risk of losing. Whether you like it or not, losses are real in the stock market. Even some of the best traders only win 40% of the time. When starting their trading journey, newcomers may acknowledge this but never truly understand it. Even those with experience start to lose confidence after losing money again, and again… and again. Most of the time, people react to this in two ways:
Tsong, suko na ako.
It happens a lot. After losing so many times, a trader just decides to call it quits. In fact, statistics say that almost 80% of Stock Traders fail. This is quite a big percentage, but people have to realize why a lot of them failed. Rather than learning why they were losing, or even bothering to see if their system actually takes the amount of losing trades into consideration, a lot of people give in to their tendency to quit. No matter how much you practice, nothing will ever compare to the actual feeling of losing money. In fact, losing money, a lot of money, was the turning point for a lot of great traders. Once losses have sunk in, they vow NEVER to lose that much money again.
Ito na, sure win na tong susunod. Pambawi ng mga talo.
If there are people who get disheartened by losses, there are some who want to make back what they’ve lost. It’s good that you want to regain what you’ve lost, how you do it is just as important. The right way would be to learn from your losses and get better. However, some people give in to their emotions. To regain everything in an instant, they go all in. When you go all-in, how fast you earn a profit could also be how fast you could lose your whole capital. If you really bounce back, trust the process. Studying and practicing help you build skills, and experience will allow you to master your emotions. Think of trading like a roller coaster; you feel invincible before the ride, only to find that the real thing scared you half to death. Only experience will allow you to master your emotions.
The double-edged sword of winning
More than just in losing trades, emotions can also get the best of you in winning situations. Anything’s possible when trading the Stock Market. Someone new could experience beginner’s luck and end up making a big profit. Or a big bull market could be happening, making even seasoned traders rich. Whatever the case, profits bring euphoria to traders. Profits are good, but not when they mess up your mentality. Why? ‘Cause people start being ignorant.
Tara all-in. Ez money.
There’s something called the gambler’s effect, and it is very relevant in stock trading. Not just in stocks, but also in gambling, people who experience a series of profits have the tendency to start acting irrationally and start risking more. Though they could earn more, the possibility of having all of your money wiped out also increases. As always, control over one’s emotions become vital in saving your hard-earned money.
Rome wasn’t built in a day
Being aware of these mistakes might make you think that you would stand a chance at not having to face them. Nope. That’s what all of us thought while starting out. The fact is, we all have to go through challenges. The only thing that we should never face and give in to is quitting. The best traders had to go through painful mistakes in order to get to where they are now. The start of your trading journey might be rocky, but it’s all part of the game. Stock trading is a continuous process of getting better. If you dream of becoming successful, whether in stocks or in other pursuits, there are times when you will have to put something important at risk in order to progress. Don’t worry though, from lessons to a wide variety of tools, Investagrams will be your partner from learning to profits.
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Check out our foreign flows tracker here: https://www.investagrams.com/Stock/ForeignFlows
