Maybe you would like to be a stock trader, but you’ve always been scared to give it a try. After all, laying your hard-earned money on the line is a frightening proposition, especially if you have no experience as a trader.
But how can you possibly get experience as a stock trader without first becoming a trader? It’s a Catch-22 – or is it?
Paper Trading – Be a Risk-Free Stock Trader
A great way to get started as a trader is through paper trading. Paper trading, despite the fancy name, is really just “imaginary” trading. You become a stock trader on paper only, with no money on the line.
Here’s how you do it: First, buy a journal. You’ll record your trades in it. Next, determine how much of a “fantasy” budget you’ll give yourself as a paper trader.
If you want to become a stock trader for real, you should probably give yourself a realistic spending limit – whatever you might be able to start your real career as a trader with.
Then, each day you should record your trades in the journal, with the date and time of the trade at the stock’s real price – no cheating!
Do You Know Another Wannabe Stock Trader? – Get Your Friend Involved
The best thing you can do to keep yourself honest as a paper trader is to enlist the help of a friend. Instead of using a journal from the office supply store, create an online journal.
This can be your very own stock trader blog, or perhaps just a simple, free message board. No matter what format you use, make sure that your posts are time-stamped. Then, enter your buys and sells on the message board, so that the real time is displayed.
You’ll stay honest because your friend could go on Yahoo! Finance and find out what the real price of the stock was at any given minute.
Don’t Limit Yourself to Buying and Selling – Use Advanced Strategies Too
Another great thing about being a paper trader is that it allows you to try out advanced strategies. Have you ever wondered how options work? You can give them a try. How about shorting stock?
Record a short on your stock trader blog and then reap the imaginary rewards as the stock goes down, instead of up.
You can even do things like trade foreign currencies, buy and sell commodity contracts, and get involved in futures – the possibilities are limitless! Just make sure that you keep yourself honest.
Otherwise, you aren’t doing yourself any good, and when you finally graduate to being a real trader, you could lose your shirt.
You Can Be The World’s Greatest Stock Trader – But It Will Take Work
Paper trading is a great way to learn about the market, and it’s a ton of fun too. Other opportunities to test your trading skills are always popping up – CNBC regularly runs “fantasy portfolio” contests that work sort of like fantasy football or baseball. Last year, they even gave away a brand new sports car to the winner!
But to be a truly great trader, you’re going to have to put in some serious work too. You need to read some of the classic investment books, such as How To Make Money in Stocks by William J. O’Neil, and Reminisces of a Stock Operator by Jesse Livermore.
You should probably start watching CNBC on a daily basis and subscribe to a couple of magazines like Forbes, Fortune, and SmartMoney. If you really want to be a full-time investor, you’ll have to first invest in a subscription to The Wall Street Journal, or better yet, Investor’s Business Daily.
Being the world’s greatest trader will take a lot of work, but even if you fall short and you’re only the 500th greatest stock trader in the world, you’ll still be rich beyond your wildest dreams!