Many people want quick success through trading shares without understanding what they need before investing. If you’re looking to get into share dealing, then it’s important, before doing anything else, that you understand what is needed of you and what risks are involved.
These are the most critical things every stock trader in the UK needs to know before they get started:
There’s No Such Thing as Easy Money.
Successful traders work extremely hard, and the rewards aren’t usually seen until years later when hard work and hours spent doing research and studying pays off. While there may be times of quick success like during a bull run, for example, most share traders will not see significant returns on their initial investment without really knowing what they are doing.
Beware of Financial Advice.
There is a lot of information about trading and other companies offering tips. Without any experience, it can be hard to tell which advice is reliable and which isn’t. Even if the advice seems good (especially if it comes from someone with initials after their name), make sure you always do your research before you act on anything anyone tells you.
Multiple scam websites post fake news stories to get people to sign up for stock alerts or promotions. These could end up costing you money through an expensive direct mail shot or, worse, by spamming your emails with useless ads.
Know Who You’re Dealing With.
In the UK, we have stricter financial regulations, which mean it is relatively easy for new traders to understand what they can and can’t do. However, if you want to open an account in the US, it’s much more difficult as they have very little regulation around trade accounts. This means that some US brokers can sell their clients any stock they choose with no repercussions or questions asked.
For a trader just starting, this could be a serious issue as you don’t know going into trading whether your broker might start selling stocks from your account without telling you first. Ensure your broker is registered with the SEC and always remember it’s important to check everything before committing any money or entering into any deals.
Earn Your Success.
Stock trading isn’t gambling. Despite us saying there are no short routes to easy money, some people will still try to give that impression by offering quick tips on how they made a lot of money in the stock market today. They might say something like, “buy X now because it is going up £1 every day this week”. Getting rich quickly usually only happens once every year or two. Even then, it is very rare for someone to make millions overnight with no previous experience or knowledge behind them. It’s important to remember that overnight successes are not common.
New traders tend to overestimate what they can do right away and end up getting disheartened when their initial accounts see a loss of money. One of the most important things to remember is that you should only risk what you can afford to lose – this means no more than 1% on any given trade. You might be tempted to go all-in at first, but if your portfolio ends up losing money, then it will be hard for you to keep trading (and even more challenging for you to get back into it) if everything’s gone already.
Don’t Trust News Sites for Investment Advice.
There are a lot of news sites out there, but some of them won’t be trustworthy sources of advice when it comes to investing. Unlike us at TradingJuice, many other financial journalists only write articles based on their personal opinions without any investment experience themselves or having spoken to anyone who does have that knowledge. Opinion pieces can often be misleading because they aren’t written by people who understand.
Stock trading is exhausting and profitable when done right. Beginner traders are advised to use a reputable online broker from Saxo Bank before starting their investment journey; join here.