How can a 20 year old start trading stocks?Jul, 30 2023
Get Your Engines Revving: Understanding the Basics of Stock Trading
So, you're 20 years old and ready to dip your toes into the world of stock trading? Good on ya! Just last week, my British shorthair Oscar and I were contemplating how interesting the stock market is. Not overly content with just chasing laser pointers, Oscar has taken up an interest in the rise and fall of company gestures. Alas, I digress. Back to trading.
Think of stock trading as you might the wild Australian outback: dangerous yet exciting, unpredictable yet rewarding. You wouldn't go traipsing around the wilderness without first learning how to navigate it, would you? Or imagine Don Bradman walking onto the pitch without knowing how to swing a bat! It's similar with the stock market, but instead of a cricket bat, you need knowledge – and heaps of it. The first step is for you to familiarise yourself with some basic stock trading terminologies like 'bullish', 'bearish', 'long', 'short', 'dividends', 'IPO', just to name a few.
Education is Key: Equip Yourself with Knowledge
Exercise the old brain muscles by doing as much reading as possible about stock trading. I don't mean some Facebook posts or Tweets from #StocksGuru. I mean substantial, thought-out, researched information. Find books, watch videos, read finance news, follow reputable finance blogs, take online courses – become a stock market sponge! Incredibly boring? Sure, as watching paint dry, but trust me, as I reluctantly attended finance seminars while my mates hit the surf, the payoff is worth it.
Knowledge is power in the stock market game. To visualize this, imagine you’re playing cricket without knowing the rules, or driving in Melbourne during peak hour, without having any idea of what the traffic signals mean. You would be lost! So start your journey with a good dose of knowledge sharpening. It will make your stock market initiation less daunting and more fruitful.
Practice Makes Perfect: Use Simulation Tools
If Oscar, who spends most of his days napping, can still find time to practice his mouse-chasing skills every day, then so can you with your stock trading skills. Yes, I know, practice trading stocks sounds as exciting as a snail race. But bear with me.
Before you invest real money into stock trading, I highly recommend getting some practice under your belt. There are stock market simulation tools out there that allow you to trade with "pretend" money. You know, like Monopoly, but less fulfilling when you win. It's a great way to get a feel for the ups and downs of the market without the risk of losing real money.
Your Financial Lifeline: Setting a Budget
I can practically hear your groaning, "A budget?! Really, Xander?" Yes, really. Even Oscar has a fish treats budget (and deems himself quite the capitalist when he manages to sneak an extra treat or two).
Just like you might plan a trip to the Gold Coast or figure out how many packets of Tim Tams you can afford this month, you also need to set a budget for your stock trading. Determine how much money you can afford to invest – and potentially lose, because, let's face it, not all stocks are winners. It doesn’t matter if you have $50 or $5000, every budding trader had to start somewhere, and it’s always prudent to begin with an amount you're comfortable losing. This will not only protect you financially but also ensure you remain in a positive headspace for trading which is equally important.
Wisdom of the Wise: Seeking Mentorship
Got a mate who's been trading stocks for years? Or maybe you admire a certain stock market hotshot and regularly follow their advice? Either way, finding a mentor can be an absolute game-changer when you're starting out in stock trading. Just like how I envy Oscar for his unparalleled relaxation skills (how he achieves this level of Zen is beyond me), finding someone who embodies what you strive to achieve in the stock market can be of great help.
Not only can a mentor provide you with valuable insights and tips based on their personal experiences, but they can also guide you through tough times when the market doesn’t follow your predictions (because sometimes it behaves as unpredictably as Melbourne’s weather).
Journey into the Unknown: Making Your First Trade
Do you know that adrenaline rush you get when you take the plunge into the cool waters of the Southern Ocean? Or the nervous excitement on the roller coaster at Luna Park just as it's about to drop? Making your first stock trade feels a bit like that.
After you've equipped yourself with knowledge, practiced, set a budget, and maybe even found a mentor or two, it's time to make your first trade. My advice? Start small. You don't want your first experience to be the stock market equivalent of being face-to-face with a saltwater crocodile. Trade in small amounts, analyze the outcomes, learn from them, and grow as a trader. You'll soon find your rhythm and gain confidence which will help when you’re ready to take on bigger trades.
Maintain Your Momentum: The Importance of Consistency
Oscar may be a lazy cat 90% of the time, but when it comes to his daily jaunts on his scratching post, his persistence is awe-inspiring. It reminds me that if you're going to make a go at stock trading, consistency is crucial.
Regular trading, meticulous record-keeping, staying updated with market news, and consistently reviewing and updating your strategies are vital in the world of trading. It's a bit like maintaining a fitness routine; you can't expect results immediately. Persistence, diligence, and patience are key. Believe me, there will be times when the market is as rough as the Rip at Port Philip Bay, but a consistent approach and a good attitude can help you weather it.
Just remember, everyone - me, your mates, even financial gurus - started at square one. Take it slow, learn at your own pace, and remember, it's okay to make mistakes. That’s how you grow as a trader. Keep things exciting, and who knows, you could have a yarn as thrilling as a wild Aussie biodiversity story to tell soon enough. Best of luck, mate!