Stocks - Things to know before jumping in
Online stock trading?has taken the world by storm. But why??
Traditionally, if you wanted to?buy stocks?you would have had to call your?brokerage firm, confirm and wait until broker?fees?and?waiting times?are applied for the order to be placed.?
It’s pretty obvious that this process takes many steps and would be counterintuitive to what we know as ‘day trading’
So, it’s no surprise that when online trading came around, its popularity overshadowed the traditional method thanks to the?advantages?it offers. Subsequently,?online stock trading?is growing faster than ever. So, if you want to take part you’ve reached the right place.
We bring you the perfect guide on how to trade stocks, what they are, and the best tips you may find out there. We will breakdown what the stock market is,
What is the Stock Market??
The stock market is a collection of exchanges and markets where traders can buy and sell companies’ shares. On this specific market, you trade stocks and equities.?
In the?stock market,?companies and enterprises sell their shares to raise funds. Investors or traders then buy and sell the shares among each other with the intention of making a profit as the company?increases?in value.?
And as in any other market, price changes occur as supply-demand fluctuations. The stock market is one of the most common ways in which new traders start gaining experience.?
Why Trade with the Stocks Market??
According to?E*trade, there are 4 main reasons to trade stocks:?
How to Trade Stocks Online??
There are some careful considerations you should take into account if you want to start trading in the stock market. Remember that placing money in the stock market involves risk. So finding ways to reduce said risk is key before starting
1. Find if the stock market suits you the best
According to?Nerdwallet, You might consider trading stocks if:
Making sure you’re not risking retirement in order to invest in stocks is the first step because you always have to put yourself in a position where ‘future you’ can benefit the most. Risking your chance at retiring puts by no means worth it.
2. Open an Account
Make sure to find a reliable broker to open your account with. In?this Surfs up! article we take a look at the most important factors you need to take into account before choosing an online broker.?
If you already have a personal account and want to do stock trading professionally it’s best if you have a separate account. Meaning it′s better to have two accounts.?Before beginning to trade become familiar with the platform interface. Learn how to use it, its benefits, and its features. Also, before beginning to trade with your capital try out the?demo versions?or the trading tools the platforms give you.?
#FastTip: Practice before committing to real funds. This way you will try your theories and see what it works and what it does not without risking your capital.?
Take into account that many financial institutions have minimum deposit requirements and brokers charge a commission for every transaction or trade you make with your account. Take a look at our Best Stock Trading Sites and find the perfect match for you!?
3. Define your trading goals?
When you are opening an account the brokers will normally ask you about your goals or what you want to achieve while trading stocks online. It usually goes down to two main objectives:?
The strategy you develop later on will be influenced by the goals you set. How you approach your trades, the type of company whose shares you decide to buy, and the type of analysis you do will be impacted by these goals.?
4. Pick your winners – Research your stocks?
To start your research, begin by examining?the types of stock?that best help meet your goals (large-cap, mid-cap, small-cap, etc.). This will help you refine the list of companies you would like to invest in. After doing so, start slow and pick one company whose stock you will trade.
The next step is to go to the company website to obtain the company’s?financial statements, this will be crucial for your?fundamental analysis. Look for additional information online (headlines, announcements, upcoming projects), and follow industry-related news that affects the company. Looking at the reports and issuings made by the U.S Security and Exchange Commission (SEC) can also be a reliable source of information.?
Watch experts’ analysis of the company, make sure to not just research the company but study what variables affect the stock price, and try to?find patterns, if there are any.
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Wall Street often relies on analysts’ estimates based on corporate financial data to recommend stocks and determine their target prices. Individual investors, too, can utilize the same type of fundamental analysis to identify potentially undervalued stocks and set price targets.
To arrive at your own reliable conclusion about a stock, you need to understand the various steps involved in?stock analysis. Some analysts follow a?top-down strategy, starting with an industry and then locating a winning company, while others follow a?bottom-up?approach
In conclusion, when you’re?buying a stock, you must make sure it’s the best for you by aligning your choice with your goals and knowledge. Just like if you were to buy a car when you?buy stocks?you have to do your?research.
Try to trade stocks of companies whose industry you understand. For example, if you don’t understand the airline industry, then you might misinterpret how the latest reports will affect the prices of airline companies’ shares. Keep it simple and with time you will become expert enough to expand into other areas.
5. Read, learn, and get prepared!?
Take advantage of all the?research, blogs, and papers?ou there, in some cases, brokers offer their own news, educational platforms for their clients. In this case, it’s a great way for you as a client to learn more both about the platform and about the market you are entering.?
Also, watch webinars, join a?social trading network?like?TradeGATEHub. There is a lot of information about trading out there. If you’re lucky enough to know a successful trader, try to get them to mentor you. There is nothing better than learning hands-on with someone with experience.
Related:?If you want to know which stocks are better, begin with checking our?Best Stocks for beginners?blog.?
While it’s not the only way, learning from a veteran trader is definitely one of the best ways. Not only will they serve as a guide, but you can also learn from their mistakes
If you consider yourself a strong learner through books,?Investopedia?shared with its readers five must-read books for every new trader:
6. Beware of the world!?
Don’t let yourself be fooled by scammers. Unfortunately, there are many people trying to prey on naive traders by promising them a “cheat sheet” to the markets, and far too many times it’s a scam.
Take each piece of advice with a pinch of salt, and if something sounds too good to be true, it probably is. Remember, if online trading was easy, everyone would succeed.
One of the best ways to avoid scams is to keep yourself informed of what’s going on in the markets and continuously read the news as well as train to become an expert in technical and fundamental analysis. The fact is, nobody can predict the markets. The best we can do is study and prepare for possible outcomes and profit off of them.?
#FastTip: Make sure to try to understand why prices go higher or lower before taking action about it. Think of the price change is really going to affect your investments in the long run or if it’s just a little fluctuation.?
7. Learn to do profound analysis
To do this start by studying the basics of?technical and fundamental analysis. With technical analysis, you will learn about price charts to try to identify momentums, trends, and price reversals that will provoke an asset’s movement.?
With the fundamental analysis, you will know about company acquisitions, market rumors, political events, news, etc. All these situations may affect the market on a macroeconomic scale and as a result, produce a price change for example.?
At any given time, and according to your personal experience, you might prefer one type of analysis over the other. But learning to read and thoroughly understand data that you find is imperative to your overall trading strategy.
8. Practice makes perfect
Before you get down to business, try your strategy out on a?demo account. While the experience of managing your emotions will be different once you have real money in the account. A demo account will help you get the feel for the markets and the platform, you’ll get to know how you feel comfortable setting up your charts, and you’ll have a head start.?
You can trade on a demo account for 2 weeks or 2 months, then when you feel ready you can change to the real deal and start trading with your money and capital. Why? Because there is no right answer regarding when to take the step.?
Related:?If you’re just getting started, check out the?Best Stocks for Beginners, or?How to Buy Stocks Online?and discover even more benefits of Online Trading.?
9. Decide your position and risk
Risk management is everything. Since trading is an activity that involves risk, how you manage it will be a determining factor in your overall success.
We tend to think of “risk” in predominantly negative terms. However, in the investment world, risk is necessary and inseparable from desirable performance. As risk increases, volatility increases as well. And, while investment professionals constantly seek—and occasionally find—ways to reduce such volatility, there is no clear agreement among them on how it’s best done.
How much risk an investor should take on depends entirely on his/her tolerance. Even though there are several metrics to measure absolute risk, a trader must learn to master his/her emotions. Without emotional control, mistakes are likely to happen from making rash decisions. In other words, your plan goes out the window if you let yourself become overwhelmed by emotions.
There are 3 main points in addressing risk:?
Financial Market analyst / Broker
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