As per the nuanced investing language, not everyone who buys and sells stocks is a stock trader. Depending on how often you buy and sell stocks, you fall in one of two categories either you’re an investor or a trader.
A trader is typically what you find on a trading floor, a hyperactive person standing in front of monitors buying and selling stocks throughout the day. On the other hand, an investor usually trades for the long haul and doesn’t frequently sell, at least not until they retire.
Therefore, stock trading isn’t always what you see on the floor of stock exchanges such as the NYSE (New York Stock Exchange). Nonetheless, you can get started and proceed from the comfort of your couch. So let’s look at what you need to know with regard to forex trading.
Decide On the Kind of Trader You Want to Be
As you contemplate how to start trading in the stock market, you also need to decide what kind of trader you want to be. Do you see yourself being active every day? Or do you wish only to trade several times a week? Or maybe you’re buying stocks to hold them for long?
Some of the most common approaches to stock trading include:
Day traders buy and sell stocks the entire day. The SEC (Securities and Exchange Commission) describes day traders as persons who carry out four or more day trades within five working days. Day traders typically use loans which can lead to substantial debts if their exploits aren’t profitable. However, day trading has the potential for quick profits.
This is a long-term kind of venture compared to day trading. Swing traders execute trades that last from one day to a couple of weeks. Although swing trading is labor-intensive, it offers relatively quick profits and less probability for loss compared to day trading.
Investing is buying and holding stocks for a long time which can be a couple of months or years.
Consider Your Finances
In the U.S, if you want to venture into day trading, you need to have a balance of at least 25,000 dollars in your account. If you can’t make it, then maybe rule out day trading.
Swing trading doesn’t come with minimum balance requirements, but to be able to trade stocks at various price points, you might need about 10,000 dollars for this endeavor. This amount guarantees that broker fees and commissions don’t deplete your account balance.
Investing requires less cash because trades are held for a long time so, broker fees and commission won’t be as much. In addition, some brokers allow traders to purchase partial shares so you can start off with a relatively small amount.
Find A Broker
A broker facilitates your trading endeavors. Therefore, they enable you to buy and sell stocks to sellers and buyers, respectively. As a trader, you need a broker that is:
- Relatively affordable: Low fees and commissions.
- Honest: Won’t steal your money or attempt to engage in malpractices
- Dependable: A broker that can make trades when you want.
Note that all brokers should provide a trading platform. Basically, a technology that enables traders to see stock quotes and charts, research, and place orders. You can test these platforms by opening practice (demo) accounts with various brokers.
Today it’s easy to carry out stock trades because of the emergence of trading apps. You can simply pick up your iPhone or Android smartphone, log into your account, and place trades.
Hone Your Trading Skills
An excellent way to hone your trading skills is to use a practice (demo) account. A demo account simulates actual trading using virtual money.
Therefore, when you make a profit when using a demo account, it doesn’t necessarily mean you’ve made actual money. However, demo accounts are valuable learning tools to let you know how stock trading works and what styles are ideal for you.
To sum it all up, stock trading is an exciting venture because it involves reward and risk. Starting off is the easy part; you also need to be prepared to incur losses. But, over time, you’ll understand what works for you, your finances, and your objectives.