I know we all have confidence tucked away in us somewhere; we may use it for our day life (i.e sports, odd job at home, etc). How can we develop confidence in trading?

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    Buy and hold is better than trading. – Pete B. Mar 14 '17 at 13:37
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    Remember, in all things (particularly with money, and potentially risky activity like trading), confidence is good, and over-confidence is terrible. If you have doubt about something ("Do I really understand the risks of this next trade?"), don't push that doubt away with "confidence". Push the doubt away with research. Familiarize yourself with what you are doing; as suggested below, use a fake money account to learn the mechanics. Many people, even those familiar with the subject, deem "trading" too risky. Instead, they invest long-term, in things like "ETF"s. No shame in being low-risk. – Grade 'Eh' Bacon Mar 14 '17 at 13:40
  • On the topic of risk vs 'intelligence' in trading, my previously laid out thoughts are here: money.stackexchange.com/a/76832/44232 . – Grade 'Eh' Bacon Mar 14 '17 at 13:44
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    The first thing you should do is not take advice from non-traders. But the things that will increase your confidence is to have a written Trading Plan, have a Risk Management Strategy so you know what your max. risk on every trade is before you actually take the trade, employ Position Sizing and Money Management so that you don't overtrade and take to much risk on any one trade, and have a Mechanical Trading System which provides all buy and sell triggers so that you don't rely on your emotions to take a trade. Once you have all that you need to back-test your trading system... – Victor Mar 14 '17 at 23:17
  • ...which will tell you whether your trading system has an edge and is potentially profitable. Then forward test the system before actually trading it. You need to make sure your losses are kept small and you let your winners run. You should aim for your average winners to be 2x to 3x larger than your average loss, this way your system will be profitable even if your win rate is only 50%. Also, you have a head start already, as studies show that women make better traders than men in general. – Victor Mar 14 '17 at 23:23

For most, confidence comes with knowledge and experience. To understand more about how investing works, read articles about types of investments that you're interested in and browse the questions on this site. To gain experience, start with a "paper money" trading account. Most brokers will allow you to apply for a "fake" account so you can practice trading with simulated money. Once you've built up some confidence, you may wish to start investing a small amount of real money.

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    This answer is really awesome, though I might suggest clarifying what a "Paper Money" account is, though I am familiar with the concept I have never seen this particular term before and had to google it. – Vality Mar 14 '17 at 17:51
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    @Vality good point! I made the edit. – Nosrac Mar 14 '17 at 17:54

The right way to develop confidence is to get educated. Confidence can come from many sources, but the right source of confidence is an understanding of how markets work.

Markets react (and overreact) to news. I think the biggest factor to trading successfully is to not allow emotion to drive you. You should determine how much you are comfortable gaining and losing and set those in limit and stop orders rather than just using market orders all of the time.

As I've grown in my understanding of the market, I find it much more rare that I feel confident enough to make a specific bet. Most of my money is allocated in index funds, and I only buy and sell small amounts to reset the percentages according to a preset allocation plan. I still keep some cash available for speculative trades in the account where those trades will add the most value.

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As other people have posted starting with "fictional money" is the best way to test a strategy, learn about the platform you are using, etc. That being said I would about how Fundamental Analysis works .

Fundamental Analysis is the very basis of learning about an assets true value is priced. However in my humble opinion, I personally just stick with Index funds. In layman's terms Index Funds are essentially computer programs that buy or sell the underlying assets based on the Index they are associated with in the portion of the underlying index. Therefore you will usually be doing as good or as bad as the market. I personally have the background, education, and skillsets to build very complex models to do fundamental analysis but even I invest primarily in index funds because a well made and well researched stock model could take 8 hours or more and Modern Portfolio Theory would suggest that most investors will inevitably have a regression to the mean and have gains equal to the market rate or return over time. Which is what an index fund already does but without the hours of work and transaction cost.

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  • You don't need to know about FA for trading. – Victor Mar 18 '17 at 14:13

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