Trading stocks for consistent profit, whether as an occasional dalliance into the market or as someone trying to make a living, is not easy. You must have both the knowledge and the temperament to do so.
⌘ Emotionally you will need the following qualities:
1. You need to be able to concentrate intensely.
2. You need to be able to withstand stress.
3. You need to be able to make decisions quickly and decisively, as they say, “to be able to pull the trigger.”
4. You need to refrain from becoming emotionally attached to a particular stock; when a stock is going down, you need to be able to sell it, even if it is your “baby.”
⌘ Intellectually you will need all the knowledge you can get and the way to obtain it is to study the best trading methods from professionals. Some traders rely on technical analysis, some rely on fundamental analysis, and others rely on both.
5. You will need a basic understanding of technical analysis which is the study of charts and indicators such as the MACD, the Stochastic, moving averages, Bollinger bands, Relative Strength Index, and more.
6. You will need to learn how to read and interpret candlestick charts.
7. For fundamental analysis, you should be able to read a company’s balance sheet and annual report, and understand earnings per share, net profit margins, return on equity (ROE), Price to Earnings Ratio (P/E), Price/Earnings to Growth or PEG ratio, Price/Book (P/B) ratio, and more.
8. It would be helpful to have an understanding of economics, particularly how the economy is doing in the United States and elsewhere in the world.
9. You should have knowledge of the various stock market sectors, and the industries in each.
10. You will need a knowledge of computers, monitors and data feeds, so that you can keep up with the market minute by minute, particularly if you are trading online, rather than placing orders through a broker.
11. You will need an understanding of the different types of orders: orders to buy, to sell, to place a limit order, to place a stop/loss order, and others.
12. You will need to understand commissions, your basis in a stock, and calculate your profit or loss for each trade.
Stock trading for a living, unless you are a professional, is a very iffy business. You can learn some of the things mentioned above by reading books and articles on the subject. Many of the major online brokerage firms have local offices where you can take a variety of courses, or you can take these courses online. Other financial organizations specialize more in teaching trading methods. There is absolutely no substitute for quality training from seasoned professional traders. Your best chance of success lies with taking a small, mentored class in trading methods, where you can participate in discussions and obtain one-to-one guidance from the class instructors, before you strike out on your own.