With a sophisticated trading platform at your disposal, you can become proficient at investing in the stock market from the comfort of your own home. Leveraging software, you can master some of the more technical aspects of day trading, but there is still more to learn. Investing in the market is not just about watching earnings multiples, stock price movements and analyst recommendations. The art of investing also has to do with personal discipline and attention to detail. With trading software like eSignal 12.2 connecting you to the market, the next step is to master your self. Accordingly, here are 3 things you should pay special attention to:
1. Don’t panic when looking at market downturns
While U.S. stock prices have appreciated over the past few years, upward trajectories don’t last forever. Downturns are inevitable and it is a good idea to always be prepared for a sudden market decline. The best thing to do is remember that you should never react emotionally to the market. While a dip in your portfolio’s value is sure to raise frustration, anger and worry, keeping calm and avoiding impulsive action will serve you well. U.S. News pointed out that institutional investors look at market downturns as buying opportunities, but retail investors panic and sell. Psychologist and Founder of Glastonbury Gary Dayton explained that fear often grips individual investors during a downturn.
“This striking tendency has been documented for over 100 years,” said Dayton, according to the news source. “At some point in a falling market, individual investors’ fear will be at its highest. Frightened at the prospect of losing even more money, many investors panic and sell their holdings.”
A sudden sell-off can prevent retail investors from getting back into the market. Additionally, those downturns are often temporary and prices rebound shortly after. As such, it is important to remain calm during market declines, because reactive selling behavior can be very detrimental to overall financial health. David Blain, CEO of BlueSky Wealth Advisors pointed out how investors need to avoid being short-sighted.
“Numerous studies have shown that investors tend to panic during declines and at bottoms,” said Blain, according to the media outlet. “It hurts because once markets recover, they tend to go up quite rapidly before investors realize that things are going back to normal. By then, they have missed out on a large portion of the upside.”
2. Study market reactions and be patient
To avoid impulsive selling or other emotional reactions, Seeking Alpha advised investors to develop a more solid understanding of what volatility is. While much technical analysis can be devoted to the study of volatility, the basic principle is: Watch the market. Retail investors should monitor market fluctuations everyday and see how they correlate to financial news, political announcements and other macroeconomic factors. Volatility can be expressed using math, but it is caused by economics and psychology. People tend to want to over-complicate the study of volatility, and without patience and observation, technical analysis will not be of maximum benefit.
3. Watch out for fees and understand the various structures
The last point of this article is devoted to understanding investor fees. As with any other service, fees are often part of any deal. Retail investors stand to benefit by knowing upfront what some of the investing fees they are likely to pay are.
The first type to be aware of is trading costs, which are fees charged by brokerage firms to buy or sell a security. Sometimes these fees are also referred to as commissions. A basic principle is the more trades made, the more fees charged. Accordingly, one way for investors to limit the amount of fees they pay is to buy and sell less. By eliminating unnecessary trades, noted The Huffington Post, investors can reduce trading costs significantly. Also, some firms offer no fees for certain securities, such as exchange traded funds – investing in these securities could prove beneficial.
Other types of fees to watch out for are IRA fees and mutual fund fees. These are payments typically charged by financial advisers for putting money into a mutual fund and for the marketing costs associated with those funds. Retail investors can look at their fund prospectuses and read under the “fees and expenses” section to learn more about any payments they are obligated to make. While some of these fees will have to be paid, it is also possible to avoid funds that charge more than 0.25 percent to 1 percent of the investment sum.
Finally, investors should also be aware of withdrawal fees. The best way to avoid these is to plan intelligently and understand the type of account being opened. Avoiding unnecessary liquidation of investment accounts will limit the number of times withdrawal fees have to be paid.
In the end, with a sophisticated trading software platform like eSignal 12.2 and some self-discipline, anything is possible.