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Five Signs To Know If Stock Trading Is For You

As all of you know by now, our vision here in Investagrams is to be the catalyst that increases the investing population here in the Philippines to 10,000,000 Filipinos. In this article, we will be giving a few signs for you to check to identify if STOCK TRADING is for you. This is only focused for those who are looking to actively trade the stock market, this doesn’t include other financial markets like currencies, commodities, cryptocurrencies, and the like. Also, let us tell you that trading is not for everyone, but long term INVESTING is. This article will simply focus on five important signs to contemplate upon based on your own personal circumstances to know if trading the stock market is for you over than just simply being a long term investor.

Here are the five signs to know if the stock trading is for you:

1. YOU HAVE AN EMERGENCY FUND

It’s very important that you already have a good amount of savings, have already set up an emergency fund, and preferably already have insurance before you venture out into active trading. This is especially true for those who are already supporting a family. Trading the stock market involves a lot of risks, and losing money is simply a natural consequence of trading. Losses are unavoidable in the stock market, so placing all your money into your trading account knowing that you will also be using those funds to pay for your child’s tuition and the electricity bill is probably not the best idea.

If you’re still in your teen years or early 20s, then you won’t necessarily need to have all the items we mentioned above. Why? It’s because you have TIME. You have the time to work to make up the losses you incur in the market (if ever it comes to that point) and you may also not have the responsibility of providing for your own family yet. However, it’s still important to at the very least have some savings set aside.

You also have to be financially literate in the context of having the DISCIPLINE to follow your budget. How is that related to trading? When you start trading the stock market, you will need to create trading plans and also practice strict self-discipline. Anything less than that may lead to financial ruin, that’s why having the ability to follow a simple budget is very important.

2. YOU HAVE TO BE COMFORTABLE WITH TAKING RISKS

Every buy transaction you make in the stock market, whether it’s in the context of short term trading or long term investing, will always have a certain amount of risk involved. However, there’s much more risk involved in trading. When you invest in the long run, you would (ideally) take some time to research a specific company to see if it’s worth the investment and stick with it for a long period of time. In trading, you could hold a position as short as just a few seconds. When you’re trading you basically make more buy transactions which means you’re taking in risk much more.

But don’t forget, you’re taking these risks in the search of a much bigger reward. Conventional wisdom says that in order to reap a big reward you have to risk a big amount; high risk = high reward. Mark Minervini personally disagrees with this statement, stating that there’s a way to reap the high reward with only little risk involved if you buy stocks at low-risk entry points. Needless to say, there will always be risks involved. This is why you have to be comfortable with taking risks if you want to venture out to trading.

3. YOU HAVE ENOUGH TIME TO CHECK THE MARKET

When you’re a long term investor, since you’re looking at a longer-term timeframe, it’s okay to only check your holdings once a week whenever you’re available. However, if you want to trade the stock market it’s highly advisable to check the market at the very least once per day. Wanting to trade the stock market doesn’t mean you have to stare at your screens from 9:30am to 3:30pm, but it does mean that you will need to find time to check the market. If you’re unable to check the market in the morning, you can simply adopt and END-OF-DAY approach and only check the market between 3:00pm to 3:25pm, right before the market closes. If you really can’t make the time to check the market before it closes, then maybe long term investing would be a much better (and safer) option.

The reason why you need to check the market at least once a day is so you wouldn’t miss out on potential big winners and so you won’t hold on to losing stocks. You never know, that one day you couldn’t check the market might be the day a stock goes up 50% in one day or one of your positions drops -30% in one day. If you want to be alerted whenever your entry price, cutloss, or target profit is hit, you can always subscribe to the INVESTAPRIME in order to gain access to the InvestaWatcher so you can receive the real-time price and news alerts via in-app notifications and SMS.

Check out this article to learn more about applying and End-Of-Day approach: Which Trading Approach is Better: End-of-Day or Intraday?

4. YOU’RE HUNGRY FOR KNOWLEDGE

Being a profitable trader, let alone a market wizard, is not something you will accomplish by watching a few YouTube videos and reading a couple of articles online. When you venture into trading the stock market, you will need to understand that you are ALWAYS a student of the market. The stock market always changes, so you will need to learn how to adapt in order to survive. Also, being a consistently successful trader is a process of perpetual learning; meaning you will need to continuously learn more and more about trading.

One of the major downfalls that cause many traders around the world to blow up their account is when they think they already know all there is to know about trading. Once you believe you already know everything, then there’s no area where you can improve on. If you don’t improve, your performance will remain stagnant. Due to that, many traders get frustrated and start going all-in on their positions in the hopes of achieving stellar performance just to eventually wipe out.

5. YOU’RE DEEPLY PASSIONATE ABOUT TRADING

This is the most important factor of them all, PASSION. We all go into the stock market seeking a way to achieve financial freedom; something we all aim to achieve. You have to remember: IF YOU WANT THE THINGS YOU’VE NEVER HAD, YOU HAVE TO DO THE THINGS YOU’VE NEVER DONE. Simply put, you have to work extremely hard to be great at your craft. Sure, you can go to half-baked, but don’t expect to achieve stellar results. If you don’t give your all in any craft, you won’t achieve it at the highest level.

It’s the same with trading; the only way to achieve triple-digit returns is to put in insurmountable effort to attain that goal. The only way a person would be willing to work extremely hard for something is only if she sees it as her passion. Ask yourself, would you put in so many hours each week working on something you hate? Probably not. Also, if you’re not deeply passionate about trading you might quit after a few rough times. You may miss out on an opportunity to achieve financial freedom only because you couldn’t go through the short term setbacks.

To conclude this article, to those who are still contemplating whether or not they should take the leap and begin trading the stock market, try to take into consideration the five points we enumerated above. However, these are all written guidelines, the best way to know if something is for you is to experience it yourself. If you want to experience what trading the stock market is like first-hand, then you can just simply use our virtual trading platform here in Investagrams so in this way you can experience trading without actually risking real money. Good luck!


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By Investa

Investagrams has helped thousands of Filipinos all over the world on their stock market journey. Now, we're aiming to help thousands more! Follow us on InvestaDaily for investing tips and stock market advice to help you reach your first million.

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