How to become a full time stock market investor? The million dollar question (quite literally) that most part-time and beginner traders want to know. The desire to go full time into stock trading surprisingly stems from a number of different reasons. It could be the adrenalin rush that the stock markets investors are inclined to or the desire to wealth creation or even, a dislike for one’s job. Whatever the reason, a career as a full time stock trader has its share of perks and benefits.
But before we get to the million dollar question, let’s clear some of the basic stuff first.
Being a Stock market Investor
On the face of it, being an investor appears deceptively easy. Individuals join the trade for many reasons – some personal and many out of passion. Stock investing offers an opportunity to create a lot of wealth in a short period of time. Money represents independence to many people. If you know the investment marketplace, you can work at your own pace, live and work as you please and never answer to a boss. Investing is also a fantastic intellectual pursuit: chess, golf, and poker all rolled into one big mind game. A survey by Forbes showed that stock investing attracts people who love puzzles and mind games.
So what does it take to be a full time stock market investor? We’ve a few points that new investors should keep in mind when venturing out.
Know What To Look For In The Market
Generally speaking, when compared to a market that is more moderate in nature, stock investing and trading for a prolonged period of time is challenging at best when market fluctuations are in extremes. This is because when the markets are at one extreme or another it is far rarer for even the most active of stocks to exhibit the same level of well-defined up and down movement that is more common when the market remains relatively stable for weeks or months at a time. When the market is stuck in bear of bull mode, momentum is far more likely to only move in one direction before dropping off. In short, the ideal strategy is one that focuses on this longer-term directional trend.
Stick to large-cap stocks
When it comes to being a successful full time stock trader, it is impossible to do so without sticking to the seemingly and potentially ‘right’ type of stocks. The better short- to medium-term gains stocks are going to be those that are of the large-cap variety. These large-cap stocks also tend to be those that see some of the most active trading across the stock exchange. Assuming the market is currently active; these stocks will then move between a pair of well-defined extremes which provides stock market investors the right opportunity to trade the trend in one direction and then back the other direction when the inevitable shift occurs.
The exponential moving average is critical
Simple Moving Averages (SMA), which calculates the average of a selected range of prices, provides support and resistance levels along with bullish and bearish patterns. Support and resistance levels can signal whether to buy a stock. Bullish and bearish crossover patterns signal price points where an investor should enter or exit stocks. Meanwhile, the Exponential Moving Average (EMA) provides traders with a clear sense of the current trends as well as ideal exit and entry points.
Stock Investor Challenges
With so much on the line in such a short period of time it is important to have a clear idea of the various types of difficulties you may face when it comes to getting acclimatized to stock investing.
Commissions limit profits:
Full time stock traders have a much higher overall trade volume than other types of traders. This naturally means that their expenses in the arena are going to be much higher than other types of trader. While there are ways to minimize these costs, there is no denying that full time stock investments are not for these with a smaller overall investment capital.
Discipline is of the highest importance:
When it comes to stock investing successfully, being able to stick with your plan, even in the midst of emotional turmoil, is of the utmost importance. This attribute is prized in this scenario simply because it is so easy to misstep and wipe out a day’s hard work in a matter of seconds.
Types of Fulltime Stock Investors
When it comes to investing in stock professionally, investors are classified in one of two ways: independent investors and investors trading for large firms.
Large Firm Investors
Investors who work for large firms are typically going to have access to a wide variety of tools that smaller traders can only dream of. The high degree of access means that they can focus on trades that are going to generate an easy profit as they will have access to information the seconds it becomes public. This will allow them to act on that information immediately, which smaller traders are still confirming the information that is still coming in.
Independent investors on the other hand must be better equipped than other average small-time investors. If not this is not the case, they will have a hard time competing with other independent investors. Independent investors are often looking for the same types of traders and those working for large firms; however, limited resources will mean that they are almost always going to need to take a greater degree of risk to achieve the same level of results.
Getting into full time stock investing should first involve establishing a clear strategy. Once you have decided on the clear path you wish to take, make sure to stick to the strategy come what may. Investors usually make the mistake of shifting tracks once they see a strategy not panning out. One strategy that works for most investors is to ensure that at least 60% of funds are in highly secure and stable return assets. This will give you the much needed reserve if things don’t work out as planned. And remember, at the end of the day, if your strategy doesn’t work, don’t be disheartened. Being a stock investor is full of trials and errors that take years to master.