How to Trade Stocks for Beginners
Stock market trading for beginners
How does the stock market work for beginners? Stock trading was once exclusive to Wall Street. However, with the inroads that have been made in the market in the last two decades, it is now possible for anyone to trade in the market through online brokerages. In the past, an investor had to instruct their broker what to buy and sell, but currently, once can already trade stocks online where traders can buy and sell stocks in a fraction of a second all on their own.
You can make money, as well as losing money in the market. You have to be smart about how you go about this whole issue. You also need to know the right tips and strategies to use if you want to be successful. You also need to understand the stock market basics.
Stock Market Basics
The stock market is controlled by supply and demand forces. Basically, when you buy stock, you hope that the stock price is eventually going to go up with time. This is due to high demand in the market that will make a lot of people want to own shares in the company that you have invested in. As a result, buyers will bid on the price, subsequently letting you make a profit in case you decide to sell your shares. Stock prices go up when the value of the company goes up. There are so many other reasons that could drive stock prices up.
Researching and Choosing Stock
When investing in stocks, you have to do your own investigations and find out what the fundamentals of the company are like. One of the main things that you should look at when you are deciding whether you should invest in a company or not is to look at the financial records, to know how well the business is doing. You should check the annual and half-yearly, as well as quarterly earnings. You should also keep an eye on press releases by the company and any other news that affects the company. This is all information that you can find on the Internet. You can also use tutorials as a guide on how to read and analyze financial statements, such as tutorials provided by the SEC.
Another approach to use is to analyze the company technically. This means that you observe the ongoing trends in the market and how the stock price has been moving with time. This can help you interpret its future performance in the market. Technical analysis is not as widely accepted as checking out the fundamentals of the company. Most traders rely on these two concepts when selecting which stocks to invest in. They rely on fundamental analysis and from time to time take a technical analysis into consideration too. This acts as a safety strategy.
You should find out as much as you can about a company before deciding whether to invest in it or not. There are so many ways to find out information about a firm. For instance, you can research online through platforms such as Yahoo! Finance. This platform offers a compilation of news stories about various businesses, stock price histories, and financial statements. If you go to websites that deal with stocks, they have analyses of various businesses and stock prices. They give advice on whether it is the best time to buy, sell or hold stock. You can check out the analysis provided and make up your own mind about what to do.
Practice Your Skills
You can gain a lot of information and understanding about the stock market by reading financial magazines, websites and listening to podcasts. All this information is useful and can help you get good at stock trading. You can even join a local investment club and get to interact with experienced investors.
However, even with all this information, nothing beats actually starting to trade. The more you trade, the better you are going to get at it. There are so many ways that you can practice. You can start by trading in the penny stock market. Some companies sell their shares for a penny. This is a great way of practicing without risking a whole lot of money.
The other option is to sign up on sites such as Investopedia, Wall Street Survivor and Market watch and trade with their online stock trading simulator. This way, you will gain experience.
What You Should Know Before Starting Trading
How to be a successful stock trader.
You might feel intimidated or overwhelmed by the trading process. But this doesn’t have to be. By mastering a few rules, you will be able to trade in the market, while minimizing your chances of losing your money.
Here are some tips and strategies that you will find useful as a beginner trader.
Find a good broker
You need to select a good broker. This will make a huge difference on how you trade. Some of the important factors to consider when choosing a broker include how much fees they charge, what kind of investments they offer and how transparent they are in the trading process. A lot of traders are likely to take advantage of beginners by confusing them with intricate processes. This can end up costing you a lot in the long term.
The best thing to do would be to find a discount broker, who is not expensive. Such a broker might have numerous resources that would make it easy even for a beginner trader to start trading. One of the best things you can do to get started is to find a broker who offers exchange-traded funds or mutual funds at no fees.
Consider starting with exchange-traded funds
A lot of new investors think that the only way to make money in the market is by trading in individual stocks. Nothing could be further from the truth. It is possible to reap handsomely by investing in mutual funds or exchange-traded funds. This is a much easier process for newbies to grasp.
The good thing about investing in mutual funds and EFTs is that it will help to diversify your portfolio. This is important as it minimizes the risk of you losing all your investment. This means that even if something catastrophic hits an individual stock, your investment will not be affected considering that your funds have been spread across many stocks. When you invest in mutual funds and EFTs, you get to know exactly what percentage of stocks you own in which companies. When you opt for a target date mutual fund, automatic adjustments will be made on your portfolio, to minimize risk as the date of your retirement draws closer. Mutual funds and EFTS are a great introduction to the world of investing since they show you how long-term investments work.
Start with safer stocks
Investing in individual stocks is a great option for a newbie. However, you can choose to invest in stocks that are more stable. This will give you better exposure to stocks that have good long-term return prospects instead of just accepting a broader index.
For instance, it might be more secure for you to invest in staple stocks as they are more secure than the general market. This is because whether the market is up or down, people will still need basic products, such as food, healthcare, and clothing. The thing is that the gains made in a bull market won’t be as much as the gains made if you had invested in a more aggressive market. When you are just starting out, it will be safer to invest in a low-risk stock instead of trying to earn profits too fast and ending up losing all your investment.
Pay reasonable fees
You could end up losing out if you must pay a lot when it comes to fees. You should opt for a no-load fund that is not expensive. This is much better than going for a fund with upfront sales load and expensive fees.
Don’t fall for hot stocks
Just because a company is great doesn’t mean that it is a good investment choice. The thing about trending companies is that their stock can end up being overvalued meaning that they won’t produce a lot of returns as compared to their stock value. It is good to accept that there are times that you have missed out on a good investment opportunity and moved on to find another opportunity.
The five points discussed here are good concepts for beginner investors to master. They provide a good starting ground for newbies.
How to Get Started with Swing Stock Trading
Swing trading is when you buy stock and then hold it for more than a day. Investors who base their investment plans on market fundamentals are placed in this category. This is because major decisions that affect a company, such that they can affect the market usually take even a week.
This is a simplistic definition of swing trading. Swing trading is more of a middle ground between trend trading and day trading. A day trader won’t hold the stock for more than a day. They can hold it for a few seconds, minutes or even hours. On the other hand, a trend trader will examine the long-term effect of the market and hold the stock for a couple of day or even two to three weeks. The decision to trade will depend on how they foresee market variables, as for whether doing well or not so well.
The Good Stocks for Swing Trading
If you want to succeed in swing trading, you have to select the right stock. Some of your best options are going for large-cap stocks. These are often actively traded on most exchanges. These stocks swing widely from high to low extremes. The trader will aim to ride on this wave for several days or even weeks and selling or buying before the stock heads to the opposite direction.
The Right Market
It can be challenging to do business in a bull or bear market when swing trading. It does well when the market is in between both extremes. This is because the most stock will be stable in a bull or bear market and will not oscillate up or down. In any of these markets, stocks will tend to move on one side only. Therefore if you trade on such kind of an environment, it will be more of a long-term kind of investment.
The best market for a swing trader is when markets are oscillating up and down. Changes in the stock prices change direction every now and then. In some cases, price movements might not change for a few months. However, the swing trader benefits from short-term trades.
For you to be successful in swing trading and long-term trading, the key lies in your timing the market well. Trend trading would have worked well in the 1990s and swing trading would have worked well in 2000 and 2001.
Swing traders will want to exit the market as soon as they hit the upper or lower channel line. They are not very keen on precision. This can result in some missed opportunities. If the market is strong, the trader can wait a little longer until they hit the channel line before cashing in their stocks.
Swing trading cannot just be used by newbie traders, but it can also be used by intermediate and advanced traders as well to make a profit. As a swing trader, you will get feedback on your market performance after a couple of days of trading. This can help to keep you motivated and to help you know where to improve. When it comes to trend trading, there is a higher chance of making more profit, as long as the trader is patient enough to ride through the trend. However, few traders can be this patient.