Liam Gibson, Wealth of Geeks
With banking busts and rate hikes dominating the headlines, a string of mixed economic indicators is once again clouding the investing outlook. This has raised the stakes for short-term retail investors, who make hay out of the daily market movements.
This year has been a mixed bag for equity markets, which have seemed poised to either slip into a crash amid fears of an imminent recession or bounce back on hopes of a long-awaited Fed pivot.
A short-lived bull run reenergized markets in January as investors tried to shake off the bearish inertia from 2022. Yet February curbed that initial enthusiasm as worries about higher-than-expected rate hikes prompted a retreat.
The Fed’s recent rate hikes - the most aggressive financial tightening cycle in decades - have not only begun to bring inflation under control but is now exerting significant pressure on banking institutions. Investors have been jittery about the stability of the global financial system this month after the collapse of Silicon Valley Bank and the sudden takeover of Credit Suisse by UBS after its implosion.
Some on Wall Street, like Morgan Stanley strategist Mike Wilson, see the recent banking crisis as heralding the “vicious” end of the bear market and predicts more pain ahead for investors. Others, like JPMorgan strategist Marko Kolanovic, see a potential “ Minsky moment “- a sudden crash caused by a dive in investor confidence - as fears from the recent banking crisis linger.
The uncertain outlook sets the stage for greater volatility, which could make active trading more stressful, with potentially higher gains and losses. This article will assess some of the obstacles rookie traders encounter when starting and consider several strategies to equip yourself with the best knowledge and resources to position yourself to succeed over the long term.
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Getting active
Success does not come easy in active investing, and even professional money managers on Wall Street often struggle to keep up with market averages. Only 11% of large-cap fund managers outperformed passive benchmarks between 2011 and 2021, according to an analysis by Morningstar.
Many novice traders face significant obstacles face is psychological. Fear, greed, and impatience lead to poor decision-making. Also, trading platforms can be complex, and interpreting their metrics and learning how to operate them effectively takes time to master them with ease. Traders also need to be on top of financial data and market trends. Trustworthy media sources must form the base of their investing information diet.
Overconfidence, poor risk management, and a lack of discipline can ruin a trader’s best-made plans and set them in the red. Significant time, effort, and learning is needed to cut one’s teeth as a trader, and even then, there are no guarantees of success.
With so many risks involved, it is little wonder passive investing is often touted as the optimal strategy for most people. However, for those determined to “make alpha” with active plays, getting set up with the right resources is vital. No one should wander blindly into the markets only to find themselves staking their savings to meet a margin call.
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Tools for the job
Several tools can make active trading easier and give traders more flexibility and control over their process.
Stock picking services leverage deep analytics and research to make recommendations on which stocks to buy and sell. Instead of picking from the sea of potential equities across the markets, traders can pick from a strong pool of premium stocks, potentially reducing and minimizing their losses.
When weighing up stock pickers, consider the time frame, risk tolerance, and trading strategy inherent in each one, ensuring it fits within their budget. Some services, like Mindful Trader, come for as little as $47 a month, while others, like Investors Underground, cost almost $300 monthly.
The stock market presents a steep learning curve for newcomers, which can be daunting when faced alone. Yet, like any other skill, trading can be taught, and receiving guidance from an instructor can accelerate a trader’s journey from rookie to professional.
First-time traders must steer clear of hucksters peddling get-rich-quick schemes and gravitate toward reputable courses that offer educational value, not the mere allure of pure profit.
A quality investing course should give students insight into both technical and fundamental stock analysis, as well as deliver knowledge on trading strategies, risk management, and market psychology. Content aside, they should also be tailored to meet your individual needs. The best trading courses feature interactive elements (webinars, chat rooms, etc.), flexible scheduling for self-paced learning, and ongoing support from the instructor.
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Green alert
It’s unrealistic for traders to watch the market all day while working at their day job.
Instead, many arm themselves with a swing trade alert service to keep an eye on things. These send out timely notifications when trade opportunities emerge for stocks and options during short-term price fluctuations. Alerts can be customized around preferred trading styles, cap sizes, or market segments. By presetting their preferences, investors can streamline their decision-making process down to the timing of a trade.
Some, like Bengingza Pro, offer a suite of features, including sentiment indicators, market analysis, and a speedy newsfeed. While others, like Hashtag Investing, Swing Trading Club, and Options Trading Club, offer Discord chat rooms to their users.
Executing trades can be daunting for novice investors. By leveraging stock picking services, trading schools, and price swing notifications, traders to make better-informed investment decisions. Yet there is no one solution to the risks of investing, and, as always, past performance can be no guarantee of future results. Like any professional pursuit, success in investing takes years of hard work and persistence, which makes the investing journey challenging and meaningful. Regardless of the trading tools they leverage, investors must rely on their own sound judgment to make it through the financial uncertainty ahead in 2023.
