When you start learning something new, like how to trade penny stocks or ETF’s, you might be tempted to learn as many different strategies as possible in the shortest amount of time. After all, knowledge is power when it comes to trading online. The more you know about the marketplace, and the more you strategize before every trade, the more likely it is that you’ll avoid any expensive mistakes. Of course, while it is important to commit yourself to an ongoing education if you want to master the trading world, it’s also crucial to make sure that you don’t expose yourself to too much, too quickly. Ultimately, it’s usually best to focus on one strategy at a time when you’re building up your financial knowledge, and today, we’re going to look at why that’s the case.
Information Overload is a Real Problem
When you develop any new skill, you need to be wary of the problem of information overload. The stock market is so full of information that it can be difficult to know where you need to focus first. Nearly all successful traders know that the important thing isn’t to learn as many different strategies as possible – it’s to find a strategy that works for you and your financial strategy. Most experts will only use a couple of methods to form their own strategy. If you just want to sound as though you know more than other people, then you can definitely spend your time learning multiple methods at once, but this won’t help you make any extra money. It could mean that you simply end up feeling confused or overwhelmed.
Finding Your Trading Focus
The majority of successful traders stick to one or two strategies to determine when they should enter and exit the market. These strategies allow you to look at trading opportunities from an objective perspective, and hopefully avoid making any dangerous mistakes. Since markets generally move sideways, or up and down, you only need one strategy for each option or each type of market. There’s no need to try and use multiple strategies at once. Instead, focus your efforts on trying to become at one strategy at a time, and you’ll see much better results. After all, practice makes perfect. Once you find a strategy that appeals to you, you can practice it as often as you like using a simulated or paper trading account. This is a form of virtual trading account that allows you to test out your market trading ideas, without putting your actual money at risk. One month of practicing the same strategy multiple times through a demo trading account should give you more confidence and knowledge than spending the same month on multiple ideas.
As is the case with many things in life, being a master at one thing is often a much better idea than attempting to be just “good enough” at many different things. This is particularly true when it comes to something like trading, where your money and financial future will be on the line.
