How To Start Investing On The Stock Exchange

Without a doubt in my mind, I believe that the main reasons that most people are unsuccessful at investing in the stock exchange are a lack of both preparation and discipline. Investment in any form is a show of faith in the future, optimism if you prefer. Whether you are buying property, antiques or stocks, you are displaying your positive outlook for your future years.

Yet despite this obviously good intention, many people make dreadful investments and lose large amounts of money. This optimism can become blinding and prevents us from seeing obvious risks or pitfalls. If we do see them, we may discount them or fail to understand their potential implications.

Everyone that has become successful at investing on the stock exchange has had to start out slowly to learn the ropes. Understanding the nature of risk is a key lesson that all investors should try to learn before they begin to invest directly in companies quoted on the stock exchange.

For years, investment newcomers were advised to start by choosing a few companies and investing on paper. In other words, the new investor would follow the progress of the company and share price without actually buying. Each day a new plot on a hand drawn graph of the company would help the investor to understand just a little more. This is known as 'paper trading'.

Over time, the investor might spot trends between the company and a leading index or sector. The price might move in odd and unpredictable ways causing a desire for more understanding and education to explain these mysteries.

This desire for new knowledge is a core trait of successful investors. To succeed at investing on the stock exchange, it is vital to firstly keep up to date, but if possible to stay ahead of the pack. This might mean reading trade journals, the annual reports of competing firms, company reviews, interviews and much more. This ongoing education is vital to success.

As computer technology has advanced and investment analysis tools that only a few years ago were expensive and highly specialized have proliferated, the basic learning process for an investor has changed.

If plotting points on a graph helped to truly understand the workings of a moving average or stop loss system, why stop? This used to be investment 101 but is now a task to be downloaded. For many investors, it was the most valuable investment they made. They learned to invest and to understand the workings of the stock exchange. They learned a skill, for others a trade.

This time and investment in learning will help the decision making process of an investor for years to come. It may both earn and save many thousands as the years pass. Is this a process that you have taken? To accompany all the reading and theory that goes with investment generally, paper trading is an important pillar in understanding both investments and the stock exchange.

Whether you used paper trading as a way to improve your investing education or not, it is vital to point out that somehow, if you are to make sound investing or trading decisions, you must get educated! That is the real key to start successfully investing on the stock exchange.