For illustration purposes, lets assume I have just invited you over for dinner. Assuming you accepted the invitation, one of the first questions your would ask is “How do I get there? “ The same applies to beginner investors. Every investor was at one time a beginner investor. The investors who reach the finish line with a nest egg had a plan to get there.

Lets get back to dinner. I live in Florida. You live in California. That would not provide enough information for your arrival. You have a starting place and a destination, but what about the plan to get to dinner? You would need to know specifics. The same applies to investing. You would prepare for the journey, chart a course and arrive safely in Florida as you would with your investment goals.
The same principle applies to beginner stock market investing. Lets assume you have $10,000.00 to invest right now. So how do you prepare?

Understand How The Stock Market Works

Individual investors should start right here. What makes a stock price move? Hint: it is not individual investors. Institutional investors, such as mutual funds, and banks, move stock prices up and down. Simple supply and demand I the order of the day. Institutions make a living buying and selling stocks. Following along with how institutions trade is a good place to start. Understand your 1000 shares of XYZ are not going to move the stock price.

Defining Yourself as An Investor

My personal stop loss point is 6%. Why is that? Because I do not like the way it feels losing 10% or even 7%. This is a hard and fast rule for me. I remember following a stock once down to a 20% loss thinking all the while it would come back. It did not. The point is I know myself, and I know my rules. They are non-negotiable factors for me with investing in the stock market.

Where Are You Now As an Investor?

Every journey begins with a starting point. Every journey has a destination point. Everything you do in between will either define your success or document your failure. Set your goals; practice your strategy with paper trading stocks. Set aside capital for short term investing. Plan to include long-term investments. Open a money market account for safely keeping your cash. If you want to trade options, first learn how to trade options . Determine your plan and then work your plan. Dinner is at 6

Day Traders

Traders that participate in day trading are called day traders. Day trading is a very risky trading style. Day Trading by definition is the buying and selling of a security within a single trading day. Stocks are never kept overnight because of extreme risk of prices changing to the detriment of the trader. The rewards of a day trading strategy can be substantial. The risk follows suit. Remember anytime the reward of trading any equity is great, conversely the risk carries the same weight or more if things go south. Ill give an example. I explored day trading a a strategy briefly in my investing career . A stock was purchased at 10 AM one Friday morning priced at $ 8.32 . 2000 Shares were purchased. The stock quickly rose to near $9.00 one hour later. The stock was held. Why? Pure and simple greed. If it went that high that quick perhaps it would go higher, right? That’s the problem with most beginning day traders. There are ways to make money with dat trading but it is not for the faint of heart. By the way the stock mentioned above was sold at the market close that day at under $7.50 a share, money lost and lesson learned

Long Term Investing

Long Term Investing on the other hand reduces your risk substantially and your stress level. Thinking of your investment on a long-term basis, takes away the day-to-day monitoring, even the minute-by-minute monitoring required in day trading. So what happens if your stock goes down on price? Market declines are a normal part of the equity investing cycle. So long as the story behind the stock is still good, market downturns can provide investors with buying opportunities that can add to their long-term growth potential. Stock experts say over the long term the stock market is still the place to put your money if you’re looking for the best returns. Here is another example , albeit one that has a measure regret. There was a day when IBM was the bell weather stock of the Stock Market. As IBM went so did the market. IBM simply controlled the comuter industry. I had read about a company named Dell Computers and did some research on the company. I decided no one could compete with IBM. I was wrong obviously , but the point is what if I had invested just $ 1000.00 dollars in Dell on that day and held the stock. I will figure out what it would be worth today and post in another article . Suffic to say it would be a significant amount.