There are very few people in the world who are not interested, at least tangentially, in the trading business. After all, apart from hunter and gatherer, trader is the oldest known business. Since the pre-historic era, men and women have engaged in the exchange of goods and services, whether it be with their neighbors or members of other tribes.
Since then, of course, the trading business has come a long way, and today, it is a trillion-dollar industry, with the New York Stock Exchange reaching a market capitalization of multiple trillions of dollars and making up 40% of all the trading done in the world. But what does that mean for the average Joe and Jane?
For a long time, the stock exchange was a privilege afforded only to those who were business insiders, financers, brokers, etc. However, in the past couple of decades this is no longer the case. Thanks to the emergence of online trading platforms like, the trading market is now available worldwide. For example, in recent years, online trading in South Africa has become a lot more popular than ever before.
While this development is certainly great, it also comes with a few drawbacks. Namely a ton of people who jump head first into trading without any prior knowledge or experience. This often results in bad investments or worse. So, in order to prevent heartache, we thought we would write up a few rules and tips for trading hopefuls, who might want to dip their toes in the business.
You Must Be Willing to Learn
There is a certain misconception that trading is a difficult task. The truth is the actual trading itself is the easy part. The difficulty comes before you even start. You must learn all the terms that the big shot stock brokers toss around. You must study the markets and learn about the volatility of stocks. There is a lot of preparation that goes into becoming a trader, is the point. And before you even start trading, you must be willing the learn all of it.
Lucky for you, we live in the information age. All the knowledge about the market that has been accumulated by dozens, if not hundreds, of professionals from the past century is at your fingertips. The internet is a vast source of information, and you can use this source to learn all that there is to learn about the market, and become the best trader you can be. However, to do this you must have quite a lot of…
Perseverance and Patience
Most stock brokers working today will tell you that perseverance is the key to accomplishing your goals. There isn’t a soul alive that works in the NYSE that hasn’t made some bad investments and lost a bit of cash. What sets them wheat from the chaff, however, is not the savvy to make good investments, but rather the perseverance to endure through the bad ones. This is absolutely not to say that a keen mind is not helpful. Simply that even with a keen mind and an acumen for trade, you are bound to make a mistake. Once you do, the true test of character comes, and if you persevere through it, you will come out stronger on the other side.
Retired traders, on the other hand, will often say that patience is the most important quality of a good trader. Sometimes, an investment might seem like a poor one. However, that poor investment could potentially grow into something much grander in the future. This is not to say that you should absolutely stick with any investment you’ve made. Sometimes, a bad investment is nothing more than that. However, at times, a stock that you might think is a bad investment, could turn out to be the next Amazon or Facebook. This is where a patient trader shines, whereas a brash one falters. And this brings us to our final point.
Fear of Missing Out: The Biggest Threat
The biggest threat to new traders is what has recently been dubbed the Fear Of Missing Out (or FOMO). To give a brief explanation of what this means, we will take an example that everyone ought to be familiar with. Imagine you are tired after a long day, and you get a call to go out with friends. You don’t feel like going out, however, there is this small, anxious part of you that feels like if you don’t go now, you might miss out on something spectacular. That anxiety has been dubbed FOMO.
So how does this apply to trading? Well, let’s say you’ve come up with a strategy, you have chosen your stocks, and you’ve made your investments. Then, suddenly a new, popular stock rises out of nowhere and you don’t have the funds to get in on it. This triggers the same anxious feeling of missing out. And it is precisely that feeling that has led to the downfall of many traders in the past.
