These days, you’ll find thousands of articles online telling you just how easy it is to start trading. Technology has changed the game, opening the doors to millions of new investors. You don’t need any financial expertise or experience, nor do you have to quit your dayjob.
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The truth is that it is really easy to start investing these days. AI truly has made the difference projected by experts not so long ago. I personally know a number of beginners – teachers, artists, secretaries – who have made good money investing.
However, you do need to be careful in how you go about getting started. Jumping in headfirst is rarely a good idea. Consider the following 3 decisions you need to make before you start trading.
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There are different types of traders, who use a range of strategies to make their money. They have carefully chosen their investing strategies, but they are really just finding what is right for them. Because when it comes down to it, everyone’s personality is suited to particular strategies and not to others.
For example, the most basic choice you’re going to need to make is whether to be a “buy and hold” trader or an “active” trader. In other words, are you playing a long game or would you rather be making trades every day? Some people are suited to making money with quick decisions about a range of investments, while others don’t have the time or personality to do so.
Figure out what kind of trader you are before getting started. This can save you a lot of emotional pressure as well as money.
Chances are, the reason you are getting into trading is that technology has made it so much easier. Unless you have a background in economics, you’re probably not much of an expert. Nor do you need to be. Technology really will do most of the legwork.
However, you need to decide what you’re comfortable with. How much control do you need to have? Will you let AI make the decisions for you? And do you even want to know the gritty details?
Again, this comes down to personality. Someone who is slightly technophobic will take a very different approach to someone who lives for every new AI innovation.
Finally, one of the most significant factors in every trader’s life is their aversion to risk. Everyone is somewhat risk averse, but some are far more so than others. There are people who are willing to risk losing all their capital for the chance to make big money. Others are willing to risk their money only on investments that are almost guaranteed to succeed.
If you are very risk averse, you are going to need to decide how far you can push yourself. By all means choose safe investments, but see if you can move a little bit outside of your comfort zone.
On the other hand, if you are a big risk taker, you need to work on figuring out just how healthy that is. Are you taking risks because you are confident in the evidence before you? Or do you get a thrill out of it? Trading should never be equivalent to gambling.
Getting into trading is very easy these days, but that doesn’t mean you shouldn’t consider your options before getting started. Think carefully about the above decisions before you take that all-important step.