What’s the Minimum Capital Outlay – $1,000, $10,000, $100,000?
One of the most popular questions amongst stock trading beginners is: “How much capital do I need to get started?” – it’s an obvious concern for every novice trader just getting started in the market, but the answer is rather simple: $0. How can you get started trading stocks with $0, you ask? Two words – Paper Trading.
Paper trading is a form of “virtual” or “demo” trading that allows you to test strategies and gain experience without risking any real money. You might be one of the individuals who decides to skip this essential phase in your trading development, but the fact of the matter is that most individuals jump into the market too early without the necessary education and practice. If you ask any expert their #1 advice for new traders, they’ll most likely recommend paper trading. And if you ask any trader their biggest regret, it will probably be choosing not to paper trade when they started. Use their bad experiences and good advice to your advantage.
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I was curious about stocks but due to the projections of businesses dealing with specific products trends etc. Its usually pretty difficult to get an exact % increase over periods of quarters because everything is subjective to cycles that cannot be determined without extensive background information of the specific product placement, demographic as well as competition for the companies i would invest in. I’ve never looked in paper trading would the same concept apply for lengthy projections of 2 years or so?
Hi Kelvin. I’m not sure I 100% understand your question, but paper trading can be used to practice or test any strategy you’d like. If you choose a long-term investing method to practice/test, it might take quite some time until you have enough information to decide if it’s effective or not. With a short-term trading method, however, you can probably prove or disprove it’s legitimacy rather quickly. I hope that helps answer your question. Take care!
Unfortunately, I was one of those newbies who tried to enter the market like I came right off Wall Street. Didn’t work out at all, and what’s worse is I started out with the most idealistic approach “penny stocks”. I mean granted I played some simulation games and ended up a trillionaire on one and a millionaire on the other in less than a week.
Either way, I’ve become quite inclusive on the subject of equity markets because of my experiences and wouldn’t take it back if I could. Honestly, paper trading is a really good start, it’s just most people who are looking to trade are filled with an emotion of impatience, and I personally never have used it for that very same reason. Maybe you have some ideas as to how to grow self-discipline at the start of any trading ambitions because it sure helps.
Hi Jerry – I appreciate your comments. The topic of discipline is a great one when it comes to trading. It’s really tough to make decisions because money is either being gained or lost, and that can be emotional. Personally, I try to reduce risk as much as possible in order to curb the emotion – take position sizes I’m comfortable with, buy at prices I’m comfortable with, do my due diligence on the ticker beforehand, etc.
But the biggest difference I saw in self-discipline for me was when I decided to create trade plans for every trade I make. And that trade plan includes my entry price and my exit price, whether the stock goes up or down. It essentially takes the emotions right out of the trade once entered. I either sell when it hits my stop loss area or sell when it hits my profit target – no questions asked. I forgot which trader I heard this from, but it’s a great quote: “If you don’t have a plan, then you don’t have a trade”.