How to start trading stocks?
17.04.2021 | 22:49
If you're thinking about trying your luck at stock trading for the first time, it is important to note that most successful traders try and keep things simple. They also try to invest in a diversified mix of low cost index funds to achieve in order to make profits in the long term.
The main aim for stock traders is to make profits by buying stocks when the price is low and then selling later, when the price of the stock increases. However, it may not be as easy as it sounds. Experience and knowledge should be your two best friends in the world of stock trading. With more knowledge and experience you will be able to make better trading decisions. With time, you will also be skilled enough to mitigate the risk factors. We are now going to talk about 6 simple and easy steps that should help you get started.
Open a brokerage account
You will need to have funds in a brokerage account if you want to start stock trading. You can open an account with an online broker within a few minutes if you don't already have a brokerage account. There is no need for you to start worrying, just because you’re opening an account will not mean that you’re investing your money too. Once you have created your account, it will give you an option to do so whenever you’re ready. Take your time and choose the broker that you think will help you achieve your goals.
There are many trading apps available as well, such as Aktien kaufen. They offer helpful tools, guidance and support at every step of the way to make the process of trading even easier and simpler for new traders.
Set a stock trading budget
Allocating more than ten percent of your portfolio to individual stocks will expose your trading capital to too much volatility, even if you get lucky or find a talent for trading stocks. However, there are many other rules that you will have to follow in order to manage risk.
Remember to never invest a huge amount of money that you can’t afford to lose. Moreover, there is no need to use money that’s earmarked for must pay, near-term expenses like tuition, bills or a down payment.
Learn to use market orders and limit orders
Once you have opened a brokerage account and put funds in it, you can use the trading platform on your mobile app or online broker's website to place your stock trades. You will have to select an order type from several options, which states how your trade will go through. When you start trading you should know about the two most common types.
Market order is an order to buy and sell a stock immediately at the best available price. Limit order is an order to buy or sell the stock only at or better than a specific price you set. In case of a buy order, the most you're willing to pay will be the price limit and the order will only go through if the price of the stock falls to that amount or below that.
Practice with a virtual trading account
There’s nothing like a low pressure, hands-on experience that traders can get through the virtual trading tools that many online stock brokers offer. Virtual trading will allow you to test your skills, knowledge and even your trading strategy before you put your real money on the line.
Choose a broker that offers virtual trading. Practice for as long as you have to or until you’re sure that you’re ready for the real stock market. Test your knowledge, skills and make any changes to your trading strategy that you need to.
Measure your returns against an appropriate benchmark
This is important, not just for new traders but even the most skilled and experienced ones. Your main goal for picking stocks is to be ahead of a benchmark index. That could be the Nasdaq composite index, the Standard & Poor’s 500 index, or other smaller indexes that are composed of companies based on geography, industry and size.
Measuring results is important and if you are unable to outperform the benchmark, then it makes sense to invest in a low-cost index mutual fund or an Exchange-Traded Fund.
Keep your perspective
To become a successful stock trader doesn’t mean that you have to find the next great breakout stock before everyone else. You might hear that a stock is poised for a pop, but so have other professional traders and the potential likely has already been attached with the stock. It might be a little too late now, but that doesn’t have to mean that you can’t take advantage of this opportunity.
A truly great investment can continue to deliver shareholder value for many years, this is also a good reason why you should be ready to spend some time trading stocks and not looking to just make quick money.
