When you start trading in the share market it is a good idea that you have some knowledge of how it works and how you are going to make your decisions. If you do not know these things, then you are most likely going to lose much of your investments, possibly even all of them. Here are 4 specific things you need to know before you start trading on the share market.
How the Share Market Works
The first thing you need to know is how the share market works. You need to understand what is going on and how and why it works. This means that you should take some time to learn about it, and you would even want to read some books from some great investors to learn their techniques and perspective on trading.
You also need to learn the tools that are available to help you in your investing to make it as safe as possible for your money. Otherwise, you probably are simply throwing your money away - hardly a way to start investing wisely.
How Much You Want To Invest
This is another good point that you need to know before you start investing. You must determine how much you can afford to lose - just in case. Invest your other money that you must keep into safer forms, such as mutual funds or bonds. You do not want to take any money that you need for your retirement and take unnecessary risks with it. By setting a budget, or simply choosing a starting amount and investing it, you can have money invested much safer.
How to Pick Shares
Knowing how to pick shares is another must before you start. You need to know how to read the share reports and develop your own system for choosing the share you want to invest in. This will require some time in reading the reports so that you understand which market sectors are most profitable, as well as knowing how to tell which companies are making real advances.
Of course, there is another way, perhaps simpler, to select your shares. You could go with electronic trading. While this has been around for a little while, you could allow this software to indicate possible good picks. This does, however, demand that you come to trust the software and its accuracy. With a good understanding of how to make your own share picks, though, you could be just as successful.
How to Minimize Your Losses
The final thing you need to understand is how to keep potential losses to a minimum by using tools like stop losses. These will enable you to invest with a greater margin of safety on your investment. After you select the shares you want, and place your stop loss where you want, it can automatically place your shares in a sell position to prevent large losses. You can also make profits and keep a good portion of it if you learn to use stop losses correctly. You can choose how to best use these tools to your greatest benefit and profit since you can tailor them to suit your needs and plans.
You can find out a lot more about the Australian Share Market at http://www.australiansharemarket.freedvd.com.au
James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site at http://www.australiansharemarket.freedvd.com.au for further information on trading the Australian Share Market