6 Steps to Becoming a Better Trader

So, you probably stumbled across this blog because you’re looking on answers on how to become a stock trader. I’ve been doing this for over 12 years, I’ve got a lot of tips and I’m gonna break down the six steps to get started in today’s video.

Are you actively trading right now, or are you just kinda getting started? If you can, just say getting started or actively trading. I’d like to know where you’re at in your trading journey.

So, I’m gonna break down the top six things that I think you should really be focusing on, and number one is actually understanding the market.

Understanding the Market

Pretty broad term, kinda out there, I get it, but the idea is there’s so many things to understand. I mean, absorb as much information as you can, watch the markets as much as you can, you know, watch videos like this, but also, you know, read books, be a true student of the market, you know.

And there’s so many things I want you to do before you’re actively trading, and a lot of it is just going out there and watching.

I mean, you can’t play a sport day one, you’ve gotta practice. You can’t learn any trade, I compare stock trading a lot to a skilled trade and if you were a plumber or an electrician or any other skilled trade, maybe you’re producing videos or building webpages, one of the first things you do is you become an apprentice and you follow the master.

You go out on the job site, you run back and forth and you bring the plumber parts and tools and you do that grunt work, but as you’re doing it you see him doing it as well.

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Finding a mentor is a great thing. At StocksToTrade we have the StocksToTrade pro mentorship program where you work with me twice daily in webinars but also, whether you get a mentor or not, put that time in in following the markets.

Read the news, read The Wall Street Journal, read, you know, be aware of what is going on in the world, study, study, study, and learn the markets slowly. Remember, the tortoise and the hare.

Take that time to learn over time and that will increase your odds of success.

Understanding Securities

Second one is understanding securities. Now, what do I mean by that? Know what you’re actually trading here, okay? I’m amazed how many times I talk to traders and I’m like, is that a NASDAQ stock, is it an NYSE stock, is it an OTC, is it a, you know, is it a gray listed stock, is it a cryptocurrency, is it a forex?

You know, there’s all these instruments out there that you can trade, but know what they are. Know what’s behind these and yeah, a lot of traders will say well just trade the price action, just trade the ticker, but you need to know that, you know, listed stocks, the NYSE stocks, the big board stocks, the NASDAQs, the OTCs, they trade differently.

There’s intricacies that you need to understand and know these things, you know? Know what an actual stock is.

Why does a stock move?

I’m amazed at how many people that are actively trading that don’t even get the idea of supply and demand and why these stocks are going up and down.

So, understand what a security is, understand what the markets are and the difference between listed as well as bulletin board stocks.

Integrate a strategy and start writing those plans

The third thing you really need to do is starting to integrate a strategy and start writing those plans. Now, I always tell traders, you know, look for something that works for you. And the first question, and it’s a good question, is well, I don’t know what works for me. That’s where you start testing and trying different strategies, writing those plans and seeing what and if those trades worked out.

So, long versus short is kinda the first one.

That’s kind of about as basic as they get. Are you gonna be a, you know, are you gonna be a buyer of stocks, or are you gonna look to short sell them and make money when they’re going down? Are you going to trade the most volatile stocks of the day? You know, a lot of you come to these videos because you’re looking to day trade and trade these big movers.

Now, that doesn’t fit everybody. Maybe you’re looking at those slower moving swing trades, or even investing. And then, are you gonna use technical indicators, are you gonna use fundamentals?

I mean, a lot of day traders never even look at the fundamentals of the stock. They don’t know if they’re making money, they don’t know if they have cash in the bank, they don’t know if they have sales.

In fact if you’re a pure momentum day trader, you may never look at the fundamentals. Vice versa, if you’re a little bit of a longer term trader, you may not even look at the chart.

You may only look at the fundamentals. What’s the price to earnings, you know, how profitable are they, what are their, what are their analysts saying about these stocks?

So, there’s many different approaches. The best thing you can do is test them. You know, write that plan down, say okay, I’m looking at this crazy volatile stock, if it breaks this key level I’d look to buy it there, I’d look to sell it here, and then see what happens.

See if this is a repeatable strategy. So many traders rush in, they all wanna, I make fun of them, I call them the making bank bro kinda guys.

You know, these are the guys, no offense to the bros out there, that are like, they, all they wanna do is make money. They wanna make money today. They don’t wanna learn, they don’t wanna put in the time to learn these strategies and test these things and that, I think, is one of the biggest reason 90% fail.

They just focus on the dollar sign, you know, making money today, they don’t worry about the process.

The process is what matters. That’s how you develop a strategy and you implement it through trade plans.

Look at Your Expenses

The fourth thing I want you to do is look at your expenses, especially commissions, okay? Something, especially if you’re trading a small account, commissions can really really eat you up, okay? If you’ve got a $500, $1,000, couple thousand dollar account and you’re moving in and out a lot, those commissions can really really add up at the end of the month and you think you’re making good money, and all of a sudden you pay a couple hundred bucks to your broker, or a couple thousand, and you’re not making what you thought you were making.

So, be sure that you know your brokers commission structure, be sure that it works for you, and then also, one thing I would like to mention, is Tradier, one of our brokerage partners, offers a great option, especially if you’re doing that testing and you’re doing that learning.

So, check out Tradier, go to StocksToTrade.com, we’ve got a link there, but what they offer is $15 a month unlimited trades when you partner with us and Tradier.

So, it’s a great deal, the way to lower your expenses, check it out then, if you don’t choose to use Tradier, which maybe you’ve got different needs that they don’t fit, still check out your broker commission structure and always call your broker.

And this is a tip that many don’t know, commissions are almost always negotiable. So, if you’re getting to the end of the month and you’re paying a lot of commissions, give them a buzz and say, what can I do to lower my commissions and, this is just kinda standard negotiation, you can always go to another broker, threaten to leave. Focus on those costs.

As a trader you’re running a business, okay? I don’t care if you’re running an ice cream shop or a trucking company or what you’re doing, one of the best ways to increase your profits is to lower your expenses and trading is no different.

So Many Overlook

Fifth thing that I think so many overlook, and this kinda goes back to step three when I talk about testing, is just don’t, please don’t dive right in with real money, especially if you’re day trading these volatile stocks, okay?

If you’re swing trading or investing in Microsoft, okay? You’re, you know, not a particularly volatile stock, though it’s been a great stock for the last couple years but, you know, not particularly volatile so it’s a little different if you’ve got real money in Microsoft, odds are they’re not going out of business tomorrow.

These volatile stocks, these penny stocks? They spike and they drop fast and I just really think it’s so important to paper trade until you find consistency.

Now, I know many of you might be rolling your eyes. I know paper trading can kind of get a bad rap because people say, and rightfully so, there’s no emotion in it.

But, I tell you, treat paper trading like it’s your real money. And this is something I want you to do. If you’ve got, say you’ve got $2,000 in your brokerage account of real money.

Start a paper trading account, we have it built in at StocksToTrade, and set it to $2,000 and treat it like it’s your real money. And if you turn that 2,000 into 3,000, then maybe start looking at the real money, but if you’re turning a $2,000 paper trading account into a 1,500 or $1,000 paper trading account, why would you ever consider putting your real money on the line?

Think about that flight simulator. If you’ve never flown a plane, would you just walk out there and take off, or would you wanna get in the flight sim and see if you know what you’re doing?

So, don’t discount the power of paper trading and truly treat it like it’s real, I mean, I know it’s hard, you gotta kinda pretend, but act like it’s real and when you are consistent, when you’re tracking your setups with that paper trading, then put that real money on the line.

Trade Small

Sixth thing, and again, I don’t know why this gets overlooked, trade small. So, now you’ve gone from step five, you’re consistent paper trading, you’re ready to let that rubber hit the road, but just trade small because now you have real emotion and your putting your real, hard earned money on the line.

Maybe it took you a month to save this up, maybe it took you years to save it up. You’re gonna have emotions, and you’re gonna have to deal with that.

What I see so many do, they go in too big too fast, stocks turn on them, they blow up, and then they’re gone. Now, they’ve followed steps one through five, they’ve taken all this time, but then they go in with too big a size and they blow up.

The beauty of these volatile stocks, you don’t need huge position size. We see some of these stocks go from $1 to literally $5 to, I mean, we’ve seen, in 2018, 2019, we’ve seen 1000% runners in a day.

If you’ve got a $1 stock that runs to 10, you don’t need that many shares. Trade small and focus on consistency.

So, what do you think? Are you using these six steps? Drop me a comment below. One of the things I’d really like you to focus on in those comments, do you believe in paper trading?

I, you know, I debate this with a lot of traders. A lot of people love it, lot of people hate it. It seems to be kinda opposite ends of the spectrum. I think it’s a great tool. Drop me a comment below, do you believe in paper trading, have you tested it, have you used it, and do you think it’s good?

Thanks for reading our article.

Beer buff. Incurable zombie guru. Amateur introvert. Avid writer. Typical bacon junkie. Trader.