New to Investing? Four Tools to Get You Started.
How one software engineer learned to navigate the stock market.
by Steve Sweetney
For a long time, the stock market seemed like a daunting place. After all, it felt like a high stakes, zero-sum game. But that’s not entirely true, although some trades (in the case of option contracts) can be .
After a nudge from an older brother and a few chapters of, “The Simple Path to Wealth,” I took my first step into the market by investing in index funds. I had done enough research to know they were “safe” investments and that I was getting a diverse portfolio!
As a new investor, the GameStop fiasco that started in January 2021 caught my eye. This curiosity led to me trading in individual stocks for the first time but I knew that before I got into riskier trades that I would need some tools to assist me.
Here are the tools I used to gain insight into the stock market:
Learning Financial Jargon
There will eventually come a time where you come across some terminology that you’re not familiar with. When you need to know something as simple as the difference between a “long” and “short” position or opening/closing a position - you can rely on Investopedia. I’m a huge fan of this resource - it has made finances more accessible to me. In addition to comprehensive descriptions for terms, pages often include a “key takeaways” section with key bullet points for easy consumption.
There are tons of individual stocks in the market that you can trade provided you have the capital to do so. A stock screener is an essential tool that allows you to filter based on variables like share price or market cap. Once you’ve selected a stock that meets your criteria you can see how it has performed in the past as well as in realtime (assuming the market is open). A favorite of mine is Yahoo! Finance - The UI is intuitive and I really like that I can see articles related to stocks all in one place.
Trading option contracts is inherently riskier than trading stocks - unlike shares, option contracts have an expiration date. A tool like OptionStrat helps make these trades easier to understand and see. OptionStrat.com is an options profit/loss calculator, using powerful data visualization techniques to determine when and if your trade will be profitable. It even includes some insightful descriptions and examples of common option strategies like “covered calls.”
Understanding Market Sentiment
Market sentiment refers to the overall consensus about a stock or the stock market as a whole. There are many investors, institutional and retail, in the market and while it would be great if we could read all of their minds to see how they felt about a particular stock, it just isn’t practical. stocksentiment.io is a tool I use when I want to see which stocks are trending and discussions around them. It searches threads on Reddit for mentions of stocks and aggregates them by each ticker.
These resources have been invaluable to me as a new investor entering the stock market, helping to educate, orient, and direct my involvement. I’ve chosen programs that are easy to use and easy to understand but I know there are many more out there that I can use as my needs evolve. What are some of your favorite financial apps and how have they helped you? I’m sure there are some great ones I’m missing out on - feel free to mention your favorites.