Archived Is there a subverse to learn about how stocks work and how to start using them? (whatever)
submitted ago by Peynus
Posted by: Peynus
Posting time: 4.9 years ago on
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Archived on: 2/12/2017 1:51:00 AM
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Archived Is there a subverse to learn about how stocks work and how to start using them? (whatever)
submitted ago by Peynus
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[–] Dereliction 0 points 4 points 4 points (+4|-0) ago
Don't practice with your money. Practice on a simulated stock market so you can exercise your investing muscles before entering a real "race." This lets you gain experience without risk. There's no reason to rush into investing and it's not a thing you should practice with money you can't afford to lose, especially when there's no need to lose money at all.
(I'm guessing that the Investopedia simulator may be decent. Google will readily produce other examples. Maybe someone here can recommend a good one.)
Beyond that, once you get a feel for it, try three or four practice accounts, each with a specific strategy outlined before you start. This is important! Good investment practices find a trader setting clear guidelines that are adhered to strictly. Compare your strategies against one another and integrate what works into a cohesive and unambiguous plan.
With that as a starting point, I offer you these additional tips:
[–] Peynus [S] 0 points 2 points 2 points (+2|-0) ago (edited ago)
Is that based on the real market or is it simulated? So, real-time or not? How long should I use these simulations? And should I therefore diversify my portfolio instead of going on one? Or is that part of the 'testing' you were speaking of? Edit; also, what's your recommended site for when I try for real?
[–] Dereliction 0 points 2 points 2 points (+2|-0) ago (edited ago)
Simulators are based on either current ("real") markets, or in the case of some software options, on historical market data which can be used to create and test complex trading strategies. The latter option is also known as "back testing" and is commonly used by day traders and some swing traders. (An example is Tradestation.) That level of testing is overboard for most investors, and you shouldn't worry about that.
Use a market simulator until you feel that you have a solid grasp as to what is happening and have shown "on paper" that you've developed a working strategy. Given that you're new, don't focus on anything too complex. Start by coming up with a few simple rules and then experiment to see how things play out. You can afford to trade any strategy on paper!
Diversification? Some will tell you that it's important (often someone peddling mutual funds) but it is possible to over-diversify and mute a strategy that could otherwise prove fruitful. This is where testing and risk tolerance comes into play. Having fewer positions means more risk but can make it easier to capture larger gains. Having many positions will make your portfolio less "swingy" (prone to rapid ups and downs) and be able to sustain more failed picks, but also tends to reduce profits. Said plainly, level of diversification is part of risk management. Just don't manage yourself right out of a profit.
(Note, too, it can be harder to manage a portfolio of dozens or hundreds of stocks, but also downright expensive with transaction fees. And don't mistake it--with active trading strategies, transaction fees can eat your profits right up!)
I'll let others answer your question about a recommended site. I retired from this sort of thing a decade ago, so I'm not in a position to offer that sort of current advice.