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A 6-Point Checklist You Need Before You Start Trading in Stocks

Stock trading is a risky and intricate business. The potential returns from engaging in stock trading can be wonderful, but the inverse losses can also be detrimental, at least if you do not carefully plan your entry into this world. 

In other words, lackadaisical entry into this ever-so-coveted area of financial wealth can be the difference between prosperity and terror, and all that comes down to is preparedness and understanding with respect to your level of financial literacy.

To hopefully help you better understand the world of stock trading and investing, we want to use this blog to provide you with a checklist of sorts, a list of six things we believe are crucial for you to understand or prepare with before beginning your journey in the realm of stock trading. 

Here we go.  

1. Identify How Much Money You Are Comfortable Risking

Risk and stock trading are like peanut butter and jelly. That’s why it’s important to set a dollar figure for how much money you are okay risking and only use that money for your investments. Using only money that you are comfortable risking (and therefore comfortable losing) will mean that you should never be worried about not being able to function monetarily on a day-to-day basis and this will make the path towards starting your investing journey a lot smoother because you are not taking unnecessary financial risks

 Risk

2. Have an Investing Strategy

Don't go into stock trading while blind. Take time to formulate a strategy for your investing journey before you are ready to trade so you are prepared for what’s to come. From figuring out where to invest your money to how much of your money to invest and researching other important aspects of trading, it is important that you do not proceed into actual stock trades without a plan in place first 

3. Choose The Right Broker

There are many services that offer stock trading functions, and it is important to pick the right one for you. As a novice in this world, you likely want to pay special attention to account and transactional minimums while opting for a broker that provides a good amount of learning resources as well, but we will leave it up to you to decide which broker best suits and aligns with your financial goals

stock chart on phone

4. Pick A Few “Safe” Stocks To Start

Yes, the greatest returns as a stock trader can sometimes come from the risky stocks that not everyone knows about. However, it is important to us that we articulate our belief in starting safely, so we recommend that anyone starting off in stock trading pick a few “safe” stocks that they are confident will provide stability before venturing off into uncharted waters with riskier investments

5. Consider The Help Of A Financial Advisor

We’ve done several blogs on this idea, but it is important to never feel like you are alone when handling your finances. This is also true as a stock trader (especially as a novice) and we believe you owe it to yourself to at least consider the help of a financial advisor when you are ready to stock trade because those are the experts in this field and just like you probably would not buy or sell your house without a realtor, we believe there is immense value in seeing if a financial advisor is right for your stock trading future

financial advisor 

6. Research Best Time To Buy/Sell A Stock

This tip is primarily about pre-stock-trading preparation with respect to a specific part of the more general “investing strategy” we discussed earlier. The volatility of stock-trading makes it necessary that you understand entry and exit strategies in this “business”. Having an understanding of the best times to buy and sell a particular stock will increase your chances of success even before you buy a single stock

That’s the end of this blog, folks. 

We hope that we’ve given you some good reference points for stock trading preparation that you can take with you to help you and even your child begin to understand some of the foremost key concepts of stock trading from a young age, because we believe that setting the groundwork for your child now will pay great dividends in the future. 

Learning to invest is hard work, but with a checklist like this one, you can put your child on a fast track to becoming our next great young investor/stock trader!

Want more help teaching your child about stock trading, investing and other money concepts?

 stock chart on laptop

Check out Explorer Hop’s learn to trade program, where our nationally and internationally-acclaimed programs work to provide you and your child with a comprehensive course on all things investing.

For more information, check out our website here and sign up for one of our many financial literacy courses today!  

We hope to see your child at one of our classes very soon!   

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