Investing in the stock market is not only about following the WIG20 live, but also about a number of market mechanisms and the art of controlling emotions, which must be learned before you start trading on the stock exchange. How to invest effectively in stock market instruments? And above all – how to start investing in the stock market?
How to start investing in the stock market?
When we type the phrase “stock exchange” into the search engine – how to start? This will give us a lot of advice that does not really translate into reducing anxiety about whether we are entering the market ready. Investing in the stock market should start with opening a demo account – whether on a virtual stock exchange, using an application or on a forex demo platform. Only practice, combined with training, will make investing a conscious action, and not a luck-driven game against the market. You first need to get to know the market, and only then think about how to make money on the stock market or how to invest in shares.
How do you remember your first stock trades?
Investing in the stock market fascinated me from the beginning, so I couldn’t wait until I came of age and opened my first account in my mother’s name. What’s more, my parents not only agreed, but trusted me enough to entrust their own savings to my investments in securities. The first transactions were a series of successes. I have specialized in buying companies on the primary market. In the 1990s, investors who wanted to purchase shares on the stock exchange in a public offering had to subscribe for shares in brokerage houses, but they were listed on the stock exchange only after about 2 months. Only then could the shares be re-sold. It is quite exotic from today’s perspective, but this is how it used to be. The stock exchange also prospered differently – there were no today’s continuous quotations, only the so-called fixings, i.e. one price per day was set, unchanged until the next opening of the stock exchange, and this took place 3 times a week.
So was investing in the stock market easier or more difficult?
Investing in the stock market at that time was on the one hand easier, on the other – more difficult. The continuous bull market until the beginning of 1994 allowed for very good results, but the long waiting period for the first listing in the case of the primary market and the small number of available shares of companies on the stock exchange meant that it was not always possible to buy as many shares as one would like. A common phenomenon was the so-called reduction of orders. In the event of a 40 percent reduction, only 60 out of the intended 100 shares could be bought. Conversely, if there was a reduction in sales (e.g., 70%), if I was a seller, I could only sell 30 shares, not 100. Today, liquidity is provided by the change in price.
How much time did you need to feel more confident in the stock market?
Despite the fact that my investments brought considerable profits from the beginning, I felt more confident in the stock market after 2-3 years of regular investments, when I gained experience in speculative markets. I also had to get to know the taste of defeat, once even a very severe one. During these years, I have gained extensive knowledge of the market and noticed what investing in the stock market entails. It turned out that learning about market mechanisms is not enough to be financially successful. It is very important and much more difficult to control emotions, and this cannot be learned in a few months. Nevertheless, the question of whether it is worth playing on the stock market is always asked?Without hesitation, I answer yes.
Playing the stock market for beginners
In my opinion, investing in the stock market requires a player to devote a significant part of their daily time to the financial markets. It is very difficult to treat it as an additional activity. Speculation assumes the desire to achieve above-average profits, so if you want to do it, you have to do everything to be the best. You should treat investing in the stock market in a serious and mature way – as your business. To do this, it is necessary to have your own strategy, to develop an individual investment style. Often, novice investors fall into complacency after the first profits, which over time turns into bitterness and blaming everything and everyone around them, when profits melt in favor of losses. This is often the result of a departure from the chosen strategy, caused by an emotional factor.
The situation is different if the investor fundamentally believes in a specific company or industry and consciously invests his money there in the long term. In this case, however, in my opinion, we are not talking about playing on the stock market, but about an investment based on the principle of Waren Buffett – I am buying a company, not shares. Such an investor believes in long-term growth, so he does not need to keep up with market reports, price fluctuations or business cycles, unless it comes to the selling stage.
What do you think successful investing in the stock market is all about?
It is widely believed that a good stock trader is someone who is good at predicting changes in the market. Meanwhile, in my opinion, the main task of an investor is not to predict increases and decreases, but to find their own individual way of playing or investing system, e.g. buy when the averages intersect, the RSI oscillator will break the level of 30 points or the company sets new monthly highs. On the other hand, I sell when the company sets minimums, etc. These are some objective factors that can be determined and checked based on historical data. If our strategy had brought a measurable effect before, there is a high probability that now it will also enable effective investing in the stock market. Subjective beliefs can help, but they cannot replace objective factors.
What attracts you most about playing the stock market?
Definitely, right after monetary winnings, the most attractive element of investing in the stock market is the satisfaction of winning against the market. The market is fair and impartial – it can be merciless, but it can also reward fantastically. Often in life, we are judged in a subjective way, through the prism of individual expectations, which is why these assessments are not always fair. The market treats every player the same. Investing in the stock market is therefore all the more satisfying because it is the result of beating a whole group of other players. If I am consistent, professional and devote myself to what I do, the market will sooner or later appreciate and reward me. It works the same way the other way around – if the investor is counting only on luck, the market will quickly verify his skills.
How is the stock exchange different from other markets?
Investing in the stock market differs from other markets mainly in its investment style. As a holder of shares, I can hold them indefinitely, even if their value drops significantly. I have the same number of shares all the time. However, there is a doubt whether it is justified to hold these shares, since the assets held can be invested in other companies that have a higher probability of profits. Often, investors do not want to admit their mistake and wade into an unsuccessful investment, depleting the value of their portfolio.
On leveraged futures markets, e.g. currencies, futures for raw materials or commodities, it is different. If the market goes in the wrong direction for us, we must either close our positions, because losses cancel out the deposit, or constantly pay additional funds until the position rebounds. Leveraged derivative markets require more vigilance from the trader.
Name 3 qualities that you think you need to develop in order to be able to invest in the stock market.
Investing money for beginners is primarily investing in your knowledge, investing online or through a mobile app. Investing in securities is a way to earn money on the stock market for people who have managed to become familiar with the market. The most important of them is certainly dedication, consistency and commitment to everyday investing. The second essential feature is to break down your own mental barriers. Investing in the stock market is somewhat against human nature. From an early age, we are taught not to make mistakes, to be successful people. Meanwhile, the stock market and investing require us to look at our own decisions objectively and admit to ourselves that we make mistakes. Without it, we will not close losing positions in time and we will zero our own account. The third important factor is the ability to think independently – not giving in to emotions and suggestions, acting according to your own rules, going in the direction you set for yourself against the odds. One of the basic tasks of a trader is to find his own system of play, which will give us an advantage on the market, and then consistently use it in everyday investments.