M1. L2. Getting Started in Share Trading

Summary

This lesson on share trading introduces the fundamentals of investing, emphasizing the importance of goal identification and understanding the difference between low and high-frequency investment strategies. It explores the roles of fundamental and technical analysis in decision-making and stresses the significance of risk management and the power of compound interest. The script encourages investors to be in control of their investment choices, while also acknowledging the option of relying on traditional stock brokers. It concludes with a challenge to reflect on the best investment approach, highlighting the psychological aspects of successful trading.

Takeaways

• 🚀 Start with a clear investment goal to simplify your investment strategy.
• 📈 Understand the difference between low-frequency investment decisions for long-term growth and high-frequency trading like day trading.
• 🤔 Self-assess whether you fit the profile of a hobbyist investor or a day trader to align with your financial aspirations and lifestyle.
• 💼 As a hobbyist investor, you may be financially secure and looking to diversify your skills and interests in the financial markets.
• 💰 Day trading can offer a potential lifestyle change and increased monthly income for those seeking to make a living from trading.
• 📊 Utilize both fundamental and technical analysis to identify quality stocks and the optimal timing for buying and selling shares.
• 🛡 Manage risk by setting strict limits on the amount of capital exposure per trade to protect your overall investment portfolio.
• 🔢 Embrace the power of compound interest by ensuring a higher reward-to-risk ratio in your trades to grow your investment account over time.
• 🔄 Recognize the cyclical nature of markets and the importance of patience and diversification in your share ownership.
• 🧘‍♂️ Adopt the mindset of successful investors who focus on one trade at a time, seek excellence over perfection, and understand the constant opportunity in the market.
• 📚 The lesson challenge encourages reflection on whether self-managing your investments or relying on a stock broker aligns best with your goals and understanding of the investment process.

Q & A

What is the main focus of the lesson on share trading?

The lesson focuses on breaking down the elements for a successful investment journey, understanding the importance of owning and managing a portfolio of shares, and learning when to enter and exit the market based on the number of shares owned.

What is the first step in preparing for share investment according to the script?

The first step is to identify your goal. Once you know your goal, it becomes easier to plan the rest of your investment strategy.

What are the two types of investment decisions discussed in the script?

The two types of investment decisions discussed are low frequency investment decisions, which may involve long-term growth, and high frequency trading investment decisions, which could involve day trading.

What is a hobbyist investor according to the script?

A hobbyist investor is someone who is financially secure and satisfied with their current situation but wants to add a skill to their portfolio and become more active in the financial markets for personal interest or to gain better interest on savings.

What does it mean to be a day trader?

A day trader is an individual dedicated to full-time market participation with the aim of generating consistent profits on a monthly or quarterly basis, making high frequency trading and investment decisions.

Why is balancing fundamental and technical analysis important for a trader?

Balancing fundamental and technical analysis is important because fundamental analysis helps identify the quality and value of stock picks, while technical analysis confirms the timing of buying and selling decisions.

What is the significance of managing unnecessary risk in trading and investments?

Managing unnecessary risk is crucial to prevent overexposure and potential significant losses. It ensures that investors are comfortable with the levels of risk and capital exposure in each decision, thus avoiding over leveraging on trades.

What is the recommended maximum risk acceptance per trade for a trader?

Generally, a trader would only accept around 2% maximum risk per trade to ensure that even if a trade goes to zero, the loss is minimal in comparison to the entire account value.

How does compound interest play a role in successful trading?

Compound interest is significant in successful trading as it allows profits to be reinvested, growing the account over time. A strict risk exposure nature and understanding of risk-to-reward levels can facilitate compounding, leading to greater gains.

What is the psychological difference between successful and unsuccessful investors according to the script?

Unsuccessful investors often believe they must trade every day to be successful and cannot afford to lose on trades, leading to a gambler's mentality. Successful investors, on the other hand, understand that the market provides constant opportunities, focus on one trade at a time, and seek a standard of excellence rather than perfection.

What is the lesson challenge presented at the end of the script?

The lesson challenge is for individuals to spend time and thought on understanding the importance of being in full control of their investment decisions, and to consider whether self-managing or relying on a traditional stock broker is the most beneficial option for them.

Outlines

00:00

📈 Getting Started with Share Trading

This paragraph introduces the concept of share trading and the importance of understanding the elements for a successful investment journey. It emphasizes the need to own and manage a portfolio, highlighting the significance of knowing when to enter and exit the market based on the number of shares owned. The speaker assures that anyone can succeed in the share market with the right techniques and encourages sticking to the initial goal that brought the listener to the course. The section also discusses the readiness to invest in shares, identifying personal investment goals, and distinguishing between low and high-frequency investment decisions, including the roles of fundamental and technical analysis in making informed decisions.

05:00

💼 Balancing Risk and Reward in Share Trading

The second paragraph delves into the balance between risk and reward in trading and investing. It clarifies that risk is not inherently bad, but unnecessary risk should be mitigated. The speaker advises on the importance of managing risk through proper capital exposure and leveraging, with a focus on maintaining a low risk exposure per trade to safeguard the overall account value. The concept of compound interest is introduced as a powerful tool for growing investment accounts, with the emphasis on achieving a higher reward-to-risk ratio to ensure consistent gains. The cyclical nature of markets and the importance of patience and diversification in share ownership are also highlighted, reinforcing the idea that successful investing requires time and strategic planning.

10:00

🧠 The Mindset of Successful Investors

The final paragraph examines the psychological differences between successful investors and traders versus the average person. It dispels common myths held by unsuccessful investors, such as the need to trade daily to be successful or the belief that losses are unacceptable. The speaker promotes a mindset of seizing opportunities as they come, focusing on the present moment, and seeking excellence over perfection. The importance of being in control of one's investment decisions is stressed, along with the suggestion to complete the course to understand the decision-making process, even for those who might rely on a stock broker. The lesson challenge encourages reflection on the most beneficial investment approach for the individual.

Keywords

💡Share Trading

Share trading refers to the act of buying and selling shares of publicly traded companies on the stock market. It is a core concept in the video, which aims to educate viewers on how to start and succeed in this activity. The script mentions that anyone can succeed in share trading by learning the right techniques, emphasizing the importance of understanding the market and making informed decisions.

💡Investment Journey

The term 'investment journey' encapsulates the entire process of an individual's experience with investing, from the initial steps to the long-term management of their portfolio. The video discusses the elements that contribute to a successful investment journey, including setting clear goals, understanding market dynamics, and developing effective strategies for buying and selling shares.

💡Portfolio Management

Portfolio management is the process of overseeing and organizing a collection of investments. In the context of the video, it is highlighted as a critical skill for investors to master, as it involves not only selecting the right shares but also knowing when to enter or exit the market and how to balance one's investments to minimize risk.

💡Day Trader

A day trader is an individual who engages in frequent buying and selling of financial instruments within a single market day. The script discusses the appeal and challenges of day trading, emphasizing that it requires a specific mindset, discipline, and a high-frequency approach to investment decisions.

💡Fundamental Analysis

Fundamental analysis is a method of evaluating a company's financial health and its stock's potential value based on economic indicators, financial ratios, and business trends. The video script explains that fundamental analysis helps investors identify the quality of a stock and its future potential value, which is a key component in making informed investment decisions.

💡Technical Analysis

Technical analysis involves studying past market data, primarily price and volume, to predict future price movements. The script mentions that technical analysis is used to confirm the timing of buying and selling decisions, complementing fundamental analysis by providing insights into market trends and patterns.

💡Risk Management

Risk management is the process of identifying, evaluating, and controlling risks associated with investments. The video emphasizes the importance of mitigating unnecessary risk while acknowledging that some level of risk is inherent and necessary for market participation. It suggests setting strict limits on the amount of risk per trade to protect the overall investment.

💡Compound Interest

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. The script quotes Albert Einstein to highlight the power of compound interest in growing investment accounts, stressing that profits from successful trading can be reinvested to generate even more returns over time.

💡Reward-to-Risk Ratio

The reward-to-risk ratio is a measure used in trading and investing to determine the potential return of an investment compared to the potential risk. The video explains that a higher reward-to-risk ratio is essential for ensuring that gains outweigh losses, which is crucial for the compounding effect to work in an investor's favor.

💡Market Cycles

Market cycles refer to the recurring patterns of economic activity in financial markets, characterized by phases of expansion and contraction. The script uses the concept of market cycles to illustrate the importance of patience and long-term perspective in investing, as well as the need to understand the broader trends beyond short-term fluctuations.

💡Psychological Blueprint

A psychological blueprint refers to the mental and emotional framework that influences an individual's behavior and decision-making. In the context of the video, it contrasts the mindset of successful investors, who are patient and focused on long-term opportunities, with that of unsuccessful investors, who may be impulsive and overly focused on short-term gains or losses.

Highlights

The lesson focuses on the elements for a successful investment journey in share trading.

Importance of owning and managing a portfolio of shares is emphasized.

Understanding when to enter and exit the market based on share ownership is crucial.

Anyone can succeed in share trading with the right techniques.

Identifying your investment goal is the first step in the investment process.

Differentiating between low and high frequency investment decisions.

The SCORE structure can adapt to both day trading and long-term investing.

Hobbyist investors seek to add skills and be active in financial markets without altering their financial security.

Day traders aim to make a living from trading, seeking lifestyle changes and increased monthly earnings.

Balancing fundamental and technical analysis is key to identifying high-probability investment opportunities.

Fundamental analysis identifies stock quality and future potential value.

Technical analysis confirms the timing of buying and selling decisions.

Mitigating unnecessary risk is vital for successful trading and investments.

Risk management involves setting a maximum acceptable risk per trade.

Compound interest is highlighted as a powerful tool for growing investment accounts.

The importance of having a higher reward-to-risk ratio for effective compounding.

Markets are cyclical, with phases of ups and downs making up long-term trends.

Owning shares means buying a part of a company's assets.

The value of patience and diversification in building a successful portfolio.

Unsuccessful investors often have a flawed belief system that can hinder their trading success.

Successful investors focus on one trade at a time and seek excellence over perfection.

The lesson challenge encourages reflection on the most beneficial investment control option.

Transcripts

we're going to be kicking things off

with learning how to get started in

share trading and in this lesson we're

going to be focusing on breaking down

the elements that will make your

investment Journey a success and then

we're going to get into what it takes to

actually learn the importance of owning

and managing a portfolio of shares you

need to understand how to get out and

when to get out of the market based on

the amount of shares that you actually

own or when to maybe add on to the

portfolio of existing shares that you

have managing a portfolio just as

important as finding value in the market

then at the end of this you're also

going to be trying to understand if you

suited for this share market and I can

definitely confirm with you that anyone

can do this successfully provided that

you learn the right techniques so stick

with us and stick with the goal that you

had in mind as to what got you towards

doing this course in the first place and

I promise you the results will really

blow you out the

water so let's kick things off with with

core topic number one and that is am I

ready to invest in shares it all starts

with identifying what your goal is the

moment you can identify what your goal

is then the easier the rest of the

picture is to paint the first thing you

need to consider is your goal to make

low frequency investment decisions and

leave them to grow over time if that is

your initiative you need to have a

predefined approach to the reason behind

what it is that you're buying and more

importantly a specific exit strategy cuz

that exit strategy will also paintt the

picture around how and what you buy in

the first place the second question you

need to ask yourself is maybe you're

more interested in making high frequency

trading investment decisions potentially

every day right so maybe you're

interested in becoming a day trader

there's a lot of value in becoming a day

trader but again it all depends on why

you're here now we can teach you how to

become both and that's where our benefit

in the structure the score structure

really comes into play because you can

just increase the frequency of those

decisions to determine if you want to

become a day trader or maybe lessen the

frequency of decisions in order to

become a long-term

investor so if you're not sure which

category either A or B that you fit into

and you need a little bit of clarity on

what it means to be a hobbyist investor

what it means to be a day trader well

maybe this will help clarify a bit of

detail so that you know exactly where

you are and maybe where you need to lean

towards if you maybe would like to

become a hobbyist investor you're

probably in a position where you're well

satisfied with your current Financial

Security so you don't want to change

what you're doing on a day-to-day basis

you're quite happy with the job and how

much you're making from your job but

maybe you just want to add a sort of

skill to your portfolio of abilities and

maybe just get a little bit more active

in the financial markets for the sake of

it maybe you would like to maybe have

more Capital gaining and some better

interest working on your savings account

or money market accounts the the fact

that we can actually manage our

portfolios ourselves and make our own

investment decisions means that there's

a lot more potential to gain better

interest on the capital that we have

allocated to these accounts if you're in

full control of your investment

decisions that means that you are in

full benefit in a position to fully

benefit from the investment being

generated on the capital that you've set

aside for your Investments and obviously

it's something that you would need to

manage from the top down and I don't

only mean by the investment decisions

themselves I mean the the financial side

of the administration

making sure the accounts is set up

correctly making sure that you are doing

your own auditing on the account and

structuring Reporting on your accounts

so there's a little bit more

Administration that goes into managing

your Investments yourselves but a lot

more benefit at the end of it so maybe

you would like to become a day trader

right if you're more interested in

making a living from your trading and

investment decisions you're probably

someone who is sick and tired of the

frustration that goes into making ends

meet each month and needs a bit of a

lifestyle change then becoming a day

trader would probably be the best route

that you could take in order to really

elevate your potential Financial

earnings at the end of each month by

participating in the market successfully

or maybe you just want to increase your

household income month on month see if

you fall into that category as well

making a living from Trading or trading

the same amount that a day trader does

with the higher frequency trading and

investment decisions is definitely going

to be the route that you should

obviously take by definition a day

trader is a Trader or investor that is

dedicated to full-time Market

participation with the hopes of

generating profits on a consistent basis

from month to month as I said or even

quarter to quarter depending on how you

structure your your goals so being able

to identify high probability setups

means that you're able to do quite a few

things successfully one of those things

that you need to do successfully is

being able to balance fundamental and

technical analysis to find the best

possible investment opportunities and we

rely on fundamental analysis to identify

the quality so how we identify which

stock picks actually hold the most

amount of value that we can actually

benefit from is where the fundamental

analysis comes into play being able to

read the micro macro environmental

influences and understand what's going

on holistically so that we can really

determine if what we're looking at holds

future potential value and then we will

rely on the technical analysis to

confirm the timing of the buying and

selling decisions so being able to

identify the value is one thing but

knowing exactly when to pull the trigger

on that buying decision or to sell off

the shares that you have back into the

market to walk away with the profits is

a perfectly timed art form all right so

let's have a brief look at how we break

down even further the approach to

mitigating unnecessary risk right and I

highlight unnecessary risk with a

specific reason that we don't want to

necessarily just uh mitigate risk in

general because risk is not necessarily

good or bad right there's a middle

ground in Risk we need risk in order to

participate in the market you can't

benefit or grow or develop anything in

life without a bit of risk right so

mitigating unnecessary risk in trading

and Investments is vcely important

nobody ever accomplished or gained

anything without the risk of time effort

or money risk needs to be managed though

as much as risk can be good as well as

maybe bad in certain circumstances in

the markets it needs to be managed if

you over leverage on certain trade then

you're definitely going to fall victim

to unnecessary risk and overexpose

yourself that can often be very hard to

actually come back from an investor must

be comfortable with the levels of risk

and capital exposure in each decision

made so you're not only looking at the

overall risk of your portfolio you're

looking at the amount of risk exposure

you have per single investment or trade

execution be strict with the maximum

amount of risk that you are willing to

accept so generally a Trader would only

accept around 2% maximum per uh risk or

per trade that they actually place in

the markets and you know what we

actually going to be having the same

sort of approach in our investment

decisions we want a very low risk

exposure per investment decision that we

make when buying shares so that if they

do for some reason one day go to

absolute zero which is almost unlikely

in some of the biggest picks that we're

going to be looking at but if that was a

potential circumstance then we only want

to make sure that the amount we're

losing is equivalent to very minimal

percentage value of our entire count so

that when we lose a trade or if we had

to lose an investment decision CU it

flatlines at zero then the loss is

minimal in comparison to our entire

account value that we have on hand to

actually participate in the marketplace

with Albert Einstein famously said that

compound interest is the eighth wonder

of the world and it truly is he who

understands it earns it he who doesn't

pays it profits are the by product of

successful trading and profits are what

we need in order to compound our

accounts with and provide that we

following a a strict risk exposure

nature and we know what our risk to

reward levels are in the market then

compounding our accounts will be that

much easier losses are expected but

ensuring we have greater gains than

losses on a consistent basis is what

will lead to the effect of compounding

working in your favor but in order to

benefit from the compounding nature on

our accounts we need to have higher

award to risk ratios so that if we lose

with only taking one step back and when

we win we're taking two steps forward

that's really the idea of how

compounding can actually benefit your

portfolio and benefit your overall

success as an investor and

Trader so slow and steady really does it

and that's not only based on the

assessment but how long you actually

hold the shares for and there's a famous

old saying as well that what goes up

must come down as well the markets are

cyclical which means that they are made

up of a whole bunch of phases which we

call phase ones and twos which are are

small ups and downs over the very short

term that make up the overall long-term

uh Trend that we see in the market which

can either be upward downward or

sideways which means no identifiable

Trend at all so what does it mean for

you as a share owner if you own a few

shares technically that means when you

purchase a company shares you're

essentially buying a share of that

company's asset obviously it depends on

how many shares you are buying that's

going to determine the seat that you

actually have focus on buying small

pieces and doing as much as you can off

the start and just build as you go and

then who knows where you might land up

there's a funny old saying that's

extremely valid as an investor and it's

that eggs take time to hatch anything

worth waiting for is definitely going to

be beneficial for you but don't put all

of your eggs into the same basket I'm

sure all of you have heard that with

enough time quality picks and overall

portfolio diversification you're

unlikely to lose much at all in the

share market but understand that the

amount that you actually benefit from is

going to take a bit of time so are you

ready to participate is the question we

need to ask now investors and Traders

have very different psychological

blueprints in comparison to the average

dver the beliefs of unsuccessful

investors when they make a bad decision

or maybe make a decision that doesn't

push them the couple of steps ahead that

they need is generally around the ideas

of well I must trade every day to make

that back or I must trade every day in

order to be successful I can't afford to

lose anything on this trade and that's

genuinely something they would tell

themselves before they even get into the

trade right and that's what gamblers do

when this losing trade gets back to

break even I'll just close it I'll get

rid of it and get ready for the next one

a lot of losing Traders do that they

don't give the market enough time to

actually play around and and fluctuate

so the market always moves against me is

something else that unsuccessful

investors probably would generally say

and a lot of Traders day Traders would

say if they have a losing streak if you

have two or three losing trades back to

to back it shouldn't really affect you

at all because as you know if you have a

good reward to risk ratio and you're

winning twice as much as you are when

you're losing then two or three losing

trades back to back isn't going to

affect your portfolio at all and you

would understand this in the moment you

become a successful investor because

successful investors know that the

markets provide a constant stream of

opportunity no matter what and

especially if you have a good reward to

risk ratio you're going to be able to

cover a losing streak of two to three

trades or investment decisions very

quickly you definitely will and again

that's more so if you're a day trader if

I miss an opportunity another one will

follow definitely it belief system of a

successful investor I trade one trade at

a time and stay in the present moment

not thinking two steps ahead all the

time a successful investor or or Trader

definitely just thinks about what they

need to do in that moment when an

opportunity poses itself to them they

know exactly the steps they need to take

in order to define the value that the

share has and it's a certain projectory

and then pull the trigger based on the

timing that they've learned through

technical analysis I seek a standard of

Excellence not Perfection you can never

be perfect in the market right you're

not going to be right 100% of the time

no one ever has been in the market

you're going to have ups and you're

going to have Downs just like the market

is cyclical and it moves up and down so

will your performance move up and down

but again if you more if your gains are

greater than your losses are then your

overall trajectory and Trend will be

upward in your performance the challenge

that i' would like to leave you with at

the end of this lesson now is that you

understand the importance of being in

full control of your investment

decisions but you must also understand

that if you don't want to be in full

control of those decisions that you can

always just rely on a traditional stock

broker but if that is you I would highly

suggest that you still complete this

course so that you can understand the

decision- making process Behind these

decisions that are being made for you

your lesson challenge is to spend time

and thought about which could be the

most beneficial option for

you