It's often said that the stock market is a "learn as you go" type of investment. But how long does it really take to learn the ropes? How long until you're making money instead of losing it? And how do you avoid some of the most common rookie mistakes?
At Wisesheets, we'll explore those questions and more. So whether you're just starting out in the stock market or you've been investing for a while but haven't seen the success you'd like, keep reading. We promise that by the end of this post, you'll better understand what it takes to be successful in stocks.
Ready? Let's go.
Things to keep in mind before trading in the stock market
- Retrain your mind to think long-term. We live in a world of instant gratification. Want pizza? Uber it. Movie? Netflix. But if you want to learn how to trade stocks, understand that it's a skill that takes time. The stock market is a marathon, not a sprint; short-term success doesn't equate to long-term success in this business.
- Be realistic with your expectations. Some of the most successful investors have been in the market for decades, studying and learning about it every day. You won't be able to turn a profit in your first week or month, and that's okay. Instead, focus on small wins as you go, like becoming familiar with the different markets and stocks, learning the terminology, and understanding how it all works.
- Get the right tools. You can check out our guide on the best stock comparison tools by category. This will help you identify better stock investment opportunities faster and speed up the rate at which you invest and learn.
The time it takes to learn the stock market depends on three things.
We know, we know. You wanted a definitive answer like "it takes 3 months to learn the stock market." But with investing, you can't make predictions like that—and it's because there are three key factors to consider when it comes to learning about the stock market.
- What you want to trade: stocks, options, futures, or forex.
- How you want to analyze the markets: fundamental analysis, technical analysis, or a combination of both.
- Your timeframe: do you want to day trade or swing trade?
Each of these factors will determine how long it takes to learn the stock market, as well as what kind of strategies and approaches you'll need.
Pick your poison: stocks, options, futures, or forex?
So, what do you want to trade? The instrument you want to sell will affect how much you need to learn. If you're just starting out, stocks are the easiest and most common asset to trade. There's no right answer here—it's all about what works best for you.
Stocks: The easiest to understand (1-2 months)
If you want to invest in stocks, the learning curve is relatively low. You can start trading with just a few basics: understanding the stock market and basic terminology; reading financial statements; tracking news stories that affect stocks; doing your own research.
If you buy a stock for $50 and it reaches $100 when you sell it, you've just doubled your money. That's the beauty of stocks—they can take off in a big way if you make a smart call. However, they can also go down just as quickly: if the stock drops to $25, you've lost half your investment.
An easy way to track your stock prices in real-time is by using a spreadsheet add-on like Wisesheets that can connect with Excel or Google. Then, all you have to do is enter your desired symbol and function (conveniently written out for you) to start getting live price data.
With these basics down, you can generally get started within a month or two of studying the stock market.
Options: More complex but higher rewards (2-4 months)
Options are a more complex type of investing where you purchase the right but not the obligation to buy or sell a stock at an agreed-upon price within a certain time frame. This is what's known as derivatives trading, and it requires more knowledge and understanding of how options work compared to stocks. You need to learn things like:
- Strike prices
- Expiration dates
- Option Premiums
- Difference between calls and puts
- Difference between buying and selling options
- The Greeks: Delta, Gamma, Theta, Vega
You won't be able to start trading options successfully until you know these concepts. So expect to spend a few months understanding them, as well as researching and building your own strategies, before getting started.
Futures: Highly complex but potentially high rewards (3-6 months)
Futures are similar to options in that they're derivatives and involve two parties, but there's one major difference: with futures, you're obligated to buy or sell at the agreed-upon price. They can be a bit more complex than options, so it's essential to understand the different markets and contracts, as well as how leverage works in futures trading.
You'll also need to understand risk management strategies, such as setting stops, limits, and trailing stops. Then there's "tick values," which are the smallest unit of price movement for a contract.
It's not easy to become a successful futures trader, and it can take up to six months or longer to learn the ropes.
Forex: Highly complex but potentially high rewards (3-6 months)
Forex trading is similar to futures trading in many ways, including the fact that you can use leverage and you're obligated to take the other side of a trade. However, forex trading involves buying and selling currencies instead of stocks or commodities. You'll need to understand concepts like pips, spreads, leverage, different order types, and rollovers.
It can take several months to learn these concepts before you even open a trading account. Additionally, forex markets are highly volatile, and you need to be very disciplined and risk-averse in your approach if you want to succeed.
So there you have it—you can see that the amount of time it takes to learn the stock market varies depending on what type of instrument you decide to trade. But no matter which one you choose, make sure to put in the necessary time and study, so you don't end up losing your investment due to a lack of knowledge.
What's your analysis method?
Once you've had an idea of which instruments to trade, the next step is figuring out how you're going to analyze them. Do you want a technical approach or a fundamental one?
Learning fundamental analysis could take months to a few years to master.
If you want to make trading decisions based on looking at a company's financial health, performance, industry, and the overall state of the economy, then a fundamental approach is the way to go. This can involve studying things like balance sheets, income statements, and cash flow statements to identify opportunities.
But this can take months to a few years to master. And it can be very tedious trying to collect and analyze tons of historical statements for a financial assessment. But fortunately, tools like Wisesheets make this much easier. You can paste years of key metrics of any company onto your spreadsheet with just a few clicks:
Want something faster? Try technical analysis (few weeks to a month).
On the other hand, technical analysis involves looking at charts and price action of stocks, futures, or forex pairs to determine when you should enter or exit the market. You'll need to understand how trends work based on past price and volume data, identify market cycles, and use indicators and oscillators to help you make better trading decisions. The learning curve for this type of analysis is shorter, so you could be up and running in a few weeks to a month.
On Wisesheets, you can customize your dashboard with stock analysis templates like DCFs, stock watchlists, screeners, and over 80 indicators and oscillators to get a better read on the markets.
But if you decide to trade stocks solely with technical indicators like moving averages and stochastic, you can shorten your learning curve from months and years to a matter of days.
Lastly: Do you want to be a day trader or a swing trader?
This is one of the most important decisions you'll make when learning about the stock market. Day trading involves making multiple trades in a day, while swing trading is when you hold your positions for days or weeks at a time.
When day trading, you'll need to be ready to make decisions quickly, as markets can move in a matter of seconds. It's best to learn about this type of trading by starting with a demo account and then moving to a live account once you're comfortable.
Swing trading allows you to take advantage of longer-term trends and could be a better approach if you don't want to be glued to your computer all day.
Wisesheets can be your partner in trade 😉
To sum it up, learning about the stock market takes time and dedication. Depending on what type of instrument or analysis method you choose, it could take anywhere from a few weeks to several years before you become proficient enough to start trading for real. Therefore, it's important to remember to take things slow and not rush into trading without adequately educating yourself first.
That's where Wisesheets can help. Our add-on for Excel and Google Sheets can provide all the data you need to make smart stock market decisions right at your fingertips.
So go ahead and try our platform today – we'll be with you every step of the way on your trading journey! 🚀