Americans are big believers in the stock markets. Surveys by the Pew Research Center show that more than half of American households—52%—have some type of investment in stocks. While it mostly takes the form of retirement accounts like 401(k)s, a non-negligible 14% of families in the United States have direct stock investments. Thanks to the abundance of platforms, channels, and trading groups, which have improved accessibility and democratized investment and trading knowledge, it only makes sense that more and more people show interest in trading and investment.
For those who are now trading stocks, knowing how and where to start can tint their whole attitude toward trading. It can also cause them extreme financial harm if they’re not careful enough. “There are many different things to do wrong when first starting to trade,” says John R, also known as Ultra Calls, a professional day trader associated with Sapphire Trading. “It’s a shame, really, because there’s a good way to ease into it.”
As someone who’s helped many people with their first steps in the world of day trading, Ultra Calls has seen the impulse to go all-in from the start. His way of guiding them to a safer trading experience? “It’s all about paper trading in the start,” Ultra Calls explains. “No matter how smart they think they are, or whose plays they are following, everyone should curb that instinct to go for the quick buck—there’s no such thing—and learn with play money first.”
Paper trading doesn’t have to be boring due to the degree of separation from reality. In fact, what Ultra Calls advises new traders to do is to invest in getting real-time data from their broker. That will provide them with maximum feedback they can use to learn. “No one ever made a mistake by making sure they knew what works on the market and what doesn’t before depositing real money,” Ultra Calls explains. “That initial investment of time and resources to learn a bit about trading will end up paying dividends sooner than later.”
Ultra Calls is in favor of continuing with the cautious approach when the training wheels come off and people start making real trades with real money. “There’s really no reason why people wouldn’t start small and work their way up,” he says. “It’s a good strategy to not extend more than 1% of your money on any single move.”
The last piece of advice Ultra Calls gives is to make sure to go in with the right mindset. “Some people expect too much, too soon. Others are flaky and renege on a strategy as soon as there’s the slightest reason to think about it,” he says. “Learning how to stay cool, execute a strategy, and don’t rush things due to greed is incredibly important. Being calm and collected usually wins the day.”