How to Buy Your First Stock, with Ricky Gutierrez
Wall Street is full of boundless potential for financial gains, even so, it’s important to be calculated when purchasing shares of any given company. That being said, in our effort to best explain how to buy your first stock, we’ve enlisted the help of investor Ricky Gutierrez – who has over 1 million people subscribed to his day trading-focused YouTube channel!
“One of the things I love about the stock market is that there are so many different ways you can make money either day trading every day, swing trading every other week, or investing over a period of time,” he says. “It doesn’t matter if you have a full-time job, a family, or if you’re a student, you can trade and invest in good companies you use every single day and do it in a way that accommodates your schedule.”
How Much Money You Need
Set aside a surplus amount of funds you have laying around that, if the worst-case scenario plays out, you can afford to lose.
You have nothing but time to make money so when you are building your treasure chest of working best purchasing practices the goal is to find a good balance of investing enough money to feel motivated but not so much you become an emotional mess. This of course changes over time with experience.
As you navigate different areas of the stock market and the risk that follows, a primary focus should be to learn. Understand that with anything in life worth doing it takes time to build on your mistakes and if you approach this with the expectation to learn, rather than to “make it or break it,” like 99% of beginner traders, then your learning experience should reflect those results.
You can earn from initial losses and down the road, when you recognize a similar scenario playing out, instinctively make the correct decision. The beginner’s goal should be nothing more than to, on the basis of acquired knowledge, develop a trading strategy unique to themself. Setting a monetary objective, or depending on one for that matter, just isn’t realistic early on.
“Every opportunity comes at some form of risk,” Gutierrez explains. “Risk management is your best friend in the stock market. Understanding that as long as you can control how much money you give back, you can always see and experience consistent growth.”
Craft a Personalized Approach
Anyone can buy a stock and sell it for a profit. It’s when things begin to go south that some traders break the risk management rule. To keep it simple, there are two sides to every trade “opportunity.” Just as much as it can go up it can, of course, go down, and thinking otherwise is very foolish. To be one step ahead, always have an exit plan, if the stock you buy drops below a certain price point, percentage, or break of pattern, commit to your plan of managing your risk accordingly.
Yes, it sucks to lose $50 but think big picture. I’d rather lose $50 quick than watch my entire trading account disappear over an agonizingly strung-out period of time. Remember, anyone can make money in the stock market but it’s the few that can tolerate the risk when things begin to go south that will win through. Understand the difference!
“You need to have some sort of criteria regarding what a stock needs to be before you decide to trade or invest in it,” Gutierrez says. “I try sticking to three guiding principles. First, that a stock is consistently bullish and indicating signs of an uptrend; next, I need there to be consistency, I trade based on technical patterns, that means I have to be able to identify a pattern to take advantage of; and the last thing is price, I don’t like overpaying, I prefer to focus on deals.”
A “Buy the Dip” Strategy
In a YouTube video from early November 2021, Gutierrez singles out Facebook’s stock, acknowledging that it’s bullish and indicates signs of an upward trend over a long period of time. Thus, the overall direction is in an investor’s favor, one of the biggest mistakes beginner traders make is they always like buying the dip on a stock that is consistently bearish – meaning that it’s selling off. Why buy the dip on something that is consistently losing money/value?
Over time Facebook does pull back, just like any stock. You should embrace pullbacks. They allow the market to breathe. No one that is well-positioned gets scared when the market pulls back. If anything, it’s an opportunity to buy more at a cheaper price and ride the recovery back up the chart. The only people that get upset when the market pulls back are those that were not prepared; we are here to be prepared, not get scared!
“I’m not here to pretend like I have a crystal ball,” Ricky Gutierrez says, as he analyzes an older chart showing Facebook’s stock suffering from a pullback. Yet, he thereafter outlines a method in which to conservatively “buy the dip,” as the saying goes. He separates a “dip” into three different stages: rejection, consolidation, and confirmation.
The rejection phase is when a stock’s price is substantially and actively decreasing, which is a moment where Gutierrez will consider investing 0%-10% of his trading funds into the stock. It’s not until the stock begins consolidating and leveling out (showing no signs of decay or growth) that he considers investing around 10%-20% of his trading funds. Then, as the stock indicates signs of an uptrend, and begins climbing back to its typical growth trajectory, he’ll step on the gas and invest anywhere between 20% and 100% of his position.
“Although this strategy can be less risky, things still may not go as planned and the stock could continue dropping, which is why risk management should be the number one priority,” he adds. “Utilizing this strategy, however, you are at least taking steps to approach the “buy the dip” concept in a much more conservative way.”
Do Your Homework
The bottom line, while the graph and ticker symbol moving on your screen might indicate a seemingly promising purchase opportunity, remember that those values are entirely based on a real-life company with actual human employees that experience turbulent (at best) market factors. Therefore, bad PR, breaking news, missed revenue targets, or executives resigning, among an infinite amount of other untimely events, can cause a stock’s value to tumble.
It’s always best to understand every facet of the business you’re planning on investing in. Billionaire Warren Buffett tells budding investors, “buy into a company because you want to own it, not because you want the stock to go up.” Yes, that means reading through an entire annual report if need be or analyzing particular financial details like the corporation’s net income, earnings per share, and price to earnings ratio.
Of course, there’s the management team, business model, and competitive advantage of a company that ought to be taken into account as well. Is all of this research required? Absolutely not and some would go so far as to consider it excessive for a trade that lasts just minutes. Although a day trader isn’t necessarily planning to make a long-term investment, be sure to do your due diligence – it will save you in so many ways.
Needing more valuable stock market tips from millionaire day trader Ricky Gutierrez? Follow his YouTube channel and join one of the largest online communities of active investors by being added to the private Techbud Solutions Facebook group he started.
If you enjoyed this story on how to buy your first stock, with Ricky Gutierrez, be sure to check out our guide to Day Trading Rules Beginners Should Know!
Legal Disclaimer: I am not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I am not a finance professional through formal education. This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.