10 tips to be a successful international equity share trader
If you’ve watched or read Limitless (spoiler alert), you know about the author who went from writer’s block to an influential government position with an eye on the US presidency. Somewhere along the path, he detoured through a brain-enhancing drug and an extremely successful stint in the stock market.
While we don’t all have access to NZT (or do we?), a lot of us have dreams of successfully investing in international stock trade. Thanks to day trading apps and online brokerage firms, we can all take a shot and do reasonably well. Here are a few tips to set you on the right path.
- Do your research
When you first get into stock trading, all those charts and graphs can be frustrating. Articles seem like gibberish, and all those colourful lines look like … colourful lines. They do matter though, so don’t just invest in stocks and shares. Invest in knowledge. Learn how to interpret those analytics and make sense of those reports. There are thousands of ‘for dummy’ blogs and videos that can demystify the jargon for you, so get cracking.
- If someone gives you a tip, do even more research
Stock tips are like casino tricks or betting systems. Everyone has their own way of looking at it, and it won’t necessarily work for you. It’s okay to discuss someone else’s investment protocol, or to walk through their thought process. Don’t automatically follow it though. Test it with research and other verification methods. If it works for you, you can try it out – in a small way. And if it backfires, don’t shoot the messenger. He was probably trying to help.
- Don’t buck trends just for the sake of it
One of the most peddled pieces of portfolio advice is to buy when others are selling. In theory, it means you get a better price, and that the price will eventually go back up. This advice can work, but only if you’re a professional and know what you’re doing. Sometimes, these decisions are based on short-selling strategies or insider information. Other times, they’re made by a billionaire who can afford to wait 500 years for his great-grandkids to benefit from this deal. Plus, he has the cash to lose. Don’t be a rebel without a cause in the stock market. It’s not likely to end well.
- Utilise effective risk management
As you’re doing your research, you’ll hear the term ‘risk management’ tossed around a lot. Explore it, understand it, and apply it. At the most basic level, don’t invest money you can’t afford to lose. So it’s okay to play the stocks using the money you saved by eating ramen instead of fancy restaurant food, but dipping into your college fund or retirement savings is a lot less smart. Trade with a wind fall, not a nest egg.
- Pick your point to run
Dave Chapelle once shared some sage advice his father gave him when he got into showbiz. “Think of the craziest amount of money they could pay you. If they offer more than that, run!” This principal applies to overseas trading as well, especially if you’re doing it online. Don’t hold on a sinking stock indefinitely. When you buy it, select your predetermined low point. If the price sinks below that, sell, regroup, and move on. A good guideline is to exit your stock when it gets to 8% lower than the price you bought it for.
- Diversify your portfolio
Spread your investments around. The more different your stocks are from each other, the better, so you buy from multiple markets, countries, sectors, and industries. This way, an event that tanks one of your holdings will leave the others intact and your portfolio will balance out. Keep your options limited to 100 brands or less, then build on them.
- Patience pays
Stock trading means sometimes, you’ll lose money. Expect it, and don’t let it crush you. Mitigate your losses, bounce back, and don’t give up. You should also keep in mind that trading success is a long-term game. A stock could take ten or twenty years to become profitable, so be prepared to hold on to your shares a few years. Focus on the long game.
- Pick the right broker
It takes years to build your portfolio, and it takes even longer to really understand what you’re doing. A lot of the time, you’ll be fumbling along and groping in the dark. That’s why you need the right brokerage firm. Whether you’re investing online or at your bank, look for a firm with a good reputation and affordable fees. This will cut down your potential losses.
- Keep your feelings out of it
Getting too emotionally attached to your stocks might make you hold on to them longer than you should. Remember, the purpose of stock trading is to make money, so while it’s okay to trust your gut, you need to give logic and statistics more credence than sentiment. Develop a set of rules for buying and selling, then follow them, even when you ‘don’t feel like it.’
- Always do a post-mortem
This doesn’t just refer to dead stocks and sell-offs. After you buy any stock, do a review. Explore what drove the purchase, and what you could have done differently. The point isn’t to second-guess yourself, so don’t. Focus on understanding your process, so that you can improve it, and correct it if you need to.