Updated: July 21, 2023
Stock investing and stock trading are two different things. It’s easy to confuse one with the other because many use the two terms interchangeably.
Basically, stock investing is buying and holding shares for the long term. The conviction comes from the company’s growth potential.
On the other hand, stock trading is doing buy-and-sell in shorter periods — usually within days, weeks, or a few months, but never more than a year.
Being clear about what you’re doing is important because investing and trading require different strategies for success. Apply the wrong strategy, and you will lose money in the stock market.
With that said, below are five essential habits of successful stock traders. And interestingly, these are also the most common things that beginners miss or overlook when trading.
Never rely on your gut feeling.
Oftentimes, traders will feel a hunch about a company after hearing about them on the news. It’s okay to follow this hunch. But instead of immediately trading, your next step should be to gather more information and study the charts.
Successful traders develop and follow a step-by-step strategy to determine if a company is worth buying or not. They don’t skip doing fundamental and technical analysis. They don’t gamble their money with wild speculations.
Grow your portfolio with small wins.
Stock trading involves making short and frequent buy-and-sell cycles, but successful stock trading requires staying in the market for as many buy-and-sell cycles as you can.
Professional traders often advise against risking more than 5% of your capital in a single trade. This means that if you have P200,000 in your account, then you should only trade with at most P10,000 per position, to manage your risk.
Avoid trading when you’re feeling emotional.
Strong emotions can adversely affect your trading. You must be in a calm state so you can do sound analysis and make rational decisions.
If you’re sad because your dog just died, avoid trading and just find another way to process your grief. If you’re ecstatic because you just got promoted at work, avoid trading and just celebrate with friends.
Follow the news.
Current events have a strong impact on the market. Even when all technical signals point to an upward movement, one bad news about a company can cause the stock price to plummet.
Make it a habit to follow what’s happening locally and globally, particularly economic and business news, important meetings, and interviews or speeches of major policymakers and leaders.
Find a community
It’s impossible to see every good trading opportunity in the market. Thus, being active in a trading forum or social media group will help you spot trends early.
But more importantly, being active in a trading community is a great place to ask questions, share your experiences, improve your trading strategies, and meet new friends.
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