3 Skills for Successful Investing

What does it take to succeed as an investor? While there’s no magic formula or secret recipe, there are time tested strategies and techniques that have done quite well over the years for people of all skill levels. It’s usually best to prepare for any new activity by practicing. That’s why so many new accountholders on brokerage sites make use of demo accounts and trade simulators. After mastering the basics of buying and selling, it’s time to choose an asset class.

For those who are just starting out in financial trading, penny stocks are often the ideal choice. There are plenty of online resources that offer in-depth reviews of companies that issue low-cost shares, which makes it easy to do preliminary research. There are hundreds of methods, but it’s helpful to choose two or three and focus on them in the beginning. Money management is the final piece in the puzzle for gaining an understanding of how to protect your capital in all kinds of markets. What’s the least you need to know about each of the key skills? The following summary explains each point in more detail.

Using Demo Accounts and Simulators

The top brokers offer demo accounts so new members can learn how to place orders, manage money, set stops, etc. Don’t miss the chance to set up a demo account and work in a simulator for at least two weeks. Of all the skills you need to acquire, this might be the most basic of the bunch.

Trading Penny Stocks

Penny stock shares have been a favorite of new and experienced trading enthusiasts for decades. The feature that brings attention to the asset class is low prices. Plus, many of the companies are young and have a lot of room for growth. As definitions go, the term is rather flexible, with the criteria for what makes a penny share ranging from below $5 to under $2. In any case, you’re dealing with securities that won’t break a typical budget.

Keep in mind that you can and should review reliable watch lists to find out what penny stocks are performing well at any given time. Watch lists offer newcomers a way to hone in on the top penny shares to trade, which can be a huge timesaver in a market where there are hundreds of choices. Learning the ins and outs of these low-cost securities is an essential skill for anyone who buys and sells financial securities.

Money Management

Anyone who wants to protect capital by making wise investments must learn about proper money management that goes beyond simple tips to maintain your budget as is. That means acquiring knowledge about things like the two percent rule, setting stops, positionsizing, and more. The two percent guideline is a suggestion for new investors. It states that you should not place more on a single trade than two percent of your entire account balance.

It’s a conservative technique that works well to preserve capital accounts of inexperienced traders. Learning where to set upper and lower stops is part art, part science, and you’ll gain the skill by making and following trades. For position sizing, use the two percent rule as an upper limit. For lower limits on how much money to place in any transaction, consider one percent of your account balance or any amount smaller than that.