Video Transcript
3 Reasons You Should Practice
Before Trading
So you’ve got your list of stocks that you want to trade or invest in and you’re ready to jump out there. But, hold up. Before you jump out there with your real money and your list of stocks, you should practice trading first. I know that you really want to get out there right now and make some money. Everyone does. But, I promise you practicing before you get out there with your real money is a very good idea and here’s why.
You worked hard for your money
You don’t want to lose any of your real money, right? I mean, who wants to throw away money? You’ve worked hard for your money and you want to make sure you keep as much of it as possible or that it is doubling itself. Well, practice trading will allow you to do just that.
You have to learn the platform and techniques
Practice trading will allow you to get familiar with different platforms or software that you may want to use and figure out details such as:
What does it look like when you buy and sell
What does that transaction look like
What does that button look like that you click
What does the buy and sell confirmation look like
You want to be familiar and comfortable with the platform that you chose. The only way you can do this is by practicing. Yes, you can learn the platform while you trade with your real money but you don’t want to lose your money while you are learning how all of this works.
You also want to get familiar with the trading and investing techniques that you plan on using and figure out which works for you and which don't. You may want to trade stocks, options or complicated techniques like straddles. But you want to figure out how it all works and be the best at it that you can before you get out there with your real money. Practicing is just going to ensure that you, from an experience standpoint, are able to trade well and minimize how much money you lose.
You have to learn how to control your emotions
When I first started trading, I learned that I can get greedy. Don’t tell anybody. But I do. I tend to get greedy when I trade. I will make a lot of money on a trade and then I’m like...
"YES, I’m getting back out there. I want to make some more money. I AM BORN FOR THIS!!!”
I jump right back out there all cocky and then… the stock market takes all my money and then some.
I had to learn that when I start feeling that way I have to step away from the computer. It's time to shut it down and go enjoy myself. Go and enjoy the wins that I already have for the day and leave it alone. Otherwise, I am bound to make some mistakes and I don’t want that. But if I stay in front of a computer with that feeling, I know I will end up losing money. So, I had to learn when it was time to step away.
Some people might get scared that a stock isn’t going straight up. Maybe the stock is going down. They get scared and they sell right away. You have to learn if it's your emotions and how you should react as a trader or investor. It's better to learn that while you’re practicing than with your real money.
TRUST ME I KNOW!
You're able to see how you react emotionally. Maybe there are some risk management tools you need to implement, like a trading plan. That's something that most traders and investors should have. I knew I had to implement one right away, so I could fight off the greed! With a trading plan, you will know when it's time to sell and when it's time to step away from the computer.
By practicing you get to bring all of this together. You improve your skills and learn how to deal with your emotions so that you become a good trader. Now, there will still be experiences to learn along the way. But by practicing, you will minimize a lot of stress and frustration and feel confident in knowing what to do.
Stocks, Links and Resources Mentioned
Sites that offer practice accounts:
Optionshouse
thinkorswim
Investopedia
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Will you be practicing before you jump into the stock market? Let me know in the comments!
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