Whether you want to start stock trading to make money or to have more influence in a company, you need to know exactly what to expect. This will ensure a better chance of success regardless of your intended timeline. If you are trading for a long-term investment, or as an active stock trader, you must familiarize yourself with different aspects of stock trading before you start.
To find out what you need to know before starting stock trading, read through this article.
How the Stock Market Works
Before you start stock trading, you need to get a basic idea about how the stock market works. Stock does not have a fixed value or price. Instead, the stock price is determined by stock traders and investors which is why it continues to fluctuate as they buy and sell stocks. Stock prices reflect the values of companies. Most people buy and sell stocks on an exchange or between set hours. Any trading that occurs outside these hours is called pre-market and after-hours trading. Seventy of the largest corporations in the world, as well as thousands of other stocks, are traded on the New York Stock Exchange. The NYSE is the largest stock exchange in the world. The measures of liquidity and supply and demand are called the bid-ask spread, which determines the difference between the asking price, or the price to buy a stock, and the bid price, which is the price to sell it.
Reach Out to a Broker
You need to find a broker to help make the trading process easier. Look for someone who takes low commissions and fees, is reliable, honest, and gives you research tools. Though, the internet provides as much information as you need it is sometimes best to have a professional for more tactical advice. Besides, you can also search for the best private ticker to help you keep track of the stock market. You should also spend time researching which qualities are best in brokers for the type of trading that you want to carry out.
Figure Out the Type of Trader That You Are
First, you should determine how often you will be trading. If you are a day trader, then you will be buying and selling stocks every day, or even multiple times a day. Though it has the potential for quick returns, it is a stressful and risky type of trading. This is because day traders usually use borrowed money to trade stocks which can easily lead to the accumulation of debts if the trading does not produce a profit. As a day trader, you would need to keep a minimum balance of $25,000 in your account. Swing trade is a more long-term approach as the trades can last from a day up to weeks. It has less potential losses than day trading. As a swing trader, a minimum of $10,000 in your account is recommended so that you don’t risk losing your balance to broker charges or commissions/ fees. Investing means that you buy and hold stocks for several months or years. It requires less capital as you can buy stocks as soon as you can afford 100 shares. Though, if you can save up more and make one large trade, then do so.
Stock trading can be rewarding regardless of whether you plan to be an active trader or invest for the long-term. It is relatively easy to get started, though, there is always a risk. So to ensure success and to be able to navigate your way through, we gathered a few things that you should know before starting stock trading.