Beginners often worry about how steep the journey ahead of them will be, but mastering the stock market is a fluid process. With each day spent sharpening your skills, you become better equipped. Most people strive to become rich quickly, which hardly ever happens. When done right, trading and investing are neither flashy nor exciting.
Learning a new skill, especially one with a high market value, like trading on the stock market, always involves serious mental effort. Not a single high-paying skill is learned at two-day workshops. Closing that mental gap of expecting to become a stock market shark in a crash course can make or break a future trader.
Most traders become profitable after consistently developing their strategies for 3-5 years. At the same time, millions of wealthy investors started with little knowledge or preparation, simply time being on their side. Getting familiar with the stock market and applying those skills to make money are not mutually exclusive nor necessary. In the short term, you can get lucky without much knowledge. However, to have longevity as a trader or investor with a successful track record, you must learn those skills and successfully apply them, and there are no shortcuts to that.
Understanding the stock market starts with learning the fundamentals of economics and financial markets, leading to awereness of market-moving forces. The next step is to identify your goals and educate yourself accordingly. Investing for wealth, retirement, or a specific goal such as homeownership, building a dividend portfolio for passive income, or trading as a full-time job requires different learning curves.
Traders must use technical analysis skills as a second skin. However, there is a myriad of educated traders who are not profitable. The difference lies in trading psychology and being aware of psychological biases. Most traders fail here, realizing it too late after a losing streak. Learning the fundamentals of economics and markets, technical analysis, chart patterns, and candles may be accomplished in mere weeks or months. At the same time, it might take years to learn to control emotions and biases, keep greed and fear at bay, and recognize mental errors in decision-making processes. Fortunately, there is a way to eliminate human errors with automated trading instantly.
On the other hand, you need different tools to become a successful investor, and you have a longer timeframe to do so. Picking stocks and analyzing companies are the first steps in this process. Investing is best kept simple by sticking to companies or sectors you understand. Learning how to read annual reports (AGM) of companies to analyze the intrinsic value of stocks is an excellent place to start.
Sector awareness, understanding economic and geopolitical changes and successfully analyzing companies are skills that can be refined on the go. Learning to invest successfully does not require as much preparation as trading. It can be started in a matter of weeks after learning to analyze a company’s intrinsic value and selecting an undervalued stock. Investors, unlike traders, do not need to make additional decisions or changes after building a portfolio.
One of the primary reasons investors fail is that they tamper with their portfolios out of boredom. That behavior may take a long time to change. Setting up a paper account for these occasions could be beneficial. Statistics show that the less a portfolio is moved around, the greater the long-term profits. This is why long-term investing is the simplest and quickest to learn.