So. You downloaded Robinhood on your phone, spent a year making trades and now you’re wondering why you haven’t made much money.
You’re not alone. Thousands if not millions of people have jumped on the trading bandwagon in the last few years as the barriers to trading for non-millionaires have disappeared in the last few years.
Apps like Stash and Robinhood and others allow small amounts of money to be invested with zero-commission, opening up trading to just about anyone with a bit of spare change and a smartphone.
Unfortunately, all these new traders are now discovering that removing the barriers to trading doesn’t mean removing the learning curve to successful trading — that requires actual learning and experience that no amount of technological advances can eliminate.
And that’s probably for the best, because while trading remains one of only ways of protecting and growing wealth in the long-term, it’s also a complicated and often counter-intuitive game of calculated risk that requires months or years of experience to truly master.
If you’re just investing small amounts of money as a kind of side hobby, with no expectations of making a lot of money, then maybe you don’t need to worry about this. However, if you actually want to see significant ROI (that’s return on investment, by the way) then you’ll need to start leveling up your game and doing your homework.
Here’s a few suggestions to get you started.
Learn How to Analyze Stocks
If you’re basing all of your trading decisions off of articles like this one, then you’ve already made a big mistake.
Internet research can be a dangerous thing, as we should all know by now. You can find an article both for and against any trade you’re considering. At the end of the day, you need to be able to make these decisions for yourself, and that means understanding at least the basics of both technical and fundamental analysis.
To put it simply, fundamental analysis is used to evaluate securities by measuring the intrinsic value of a stock, while technical analysis uses stock charts to identify patterns that could tell you what the security might do in the future.
There’s a lot more to learn about these. By learning these forms of analysis, you can make judgments from your own homework and dispense with the anxiety of counter-opinions on the internet.
Find Some Technology to Help
Once you’ve mastered some of the basic, human-based skills of trading, you can start to explore the technology available to help you.
The machine learning and artificial intelligence now available can add immense value to your understanding of the marketplace. These technologies don’t substitute for human judgment, but they do provide information you can use to make smarter decisions — as long as you’re capable of understanding what the information is really saying.
Or as Economic Times put it: “The technology here is not a replacement for the human brain, but is a tool to make it even smarter.”
Letting Emotion Cloud Your Judgment
When starting out, too many traders allow their emotions and personal attachments to hinder their judgment and trading ability.
Matt Choi, who runs the trading education site Certus Trading, argues that newcomers to trading should instead embrace a “rule-based trading” approach that counters our emotional responses.
“I teach traders how to find high probability trade setups using fixed parameters,” Matt Choi said on NeoAdviser.com. “What this means is that if the stock is showing A, B, and C, then it is a buy. Or if the stock is showing X, Y, Z, then it is a sell. And the best part is, we can program the A, B, Cs, and the X, Y, Zs in trading platforms, and it literally takes seconds to identify trade opportunities based on a set of fixed criteria.”
You don’t need an MBA from Harvard to invest successfully, but you do need to put in some time learning the process. The financial system is easier to access for new traders, but it’s also more complicated than ever before.
Do your homework, and over time, you should start to see results.