Over the last two decades, technological advancement has significantly changed how many sectors work. One sector that has experienced a massive change in such times is the online stock trading sector.
The entry barrier to trading has never been this easy to cross. Nowadays, anybody can start earning money from the market with a general understanding of how it works, the right trading tools, and decent trading capital.
Online trading offers you the opportunity to work from home, set your work hours, and essentially be your own boss. However, understanding the working of online stock trading can often be quite complicated for beginners. It is certainly not as easy as winning big on Book of Ra.
Learning about the various types of stock trading, stock trading terms, and stock trading platforms can be pretty overwhelming for anyone. However, you need not fret, as, in this article, we will provide you with tips that will make stock trading easy for you.
Learn About Stock Trading From A Mentor
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The first thing you should do before taking this leap is to educate yourself about the stock market. The best way to learn about it is by asking an experienced stock trader to mentor you.
This mentor could be a past or current professor, a coworker, a friend, or a family member. A good mentor will answer all your questions, recommend useful resources, and help you when the market crashes or gets tough. The most successful investors in history had mentors when they were starting.
Take The Help Of The Internet And Stock Trading Games
You can visit various online forums where all your questions can be answered. We recommend checking out Trade2Win and Elite Trader. These are great forums where you can start learning about the stock market.
Otherwise, you can download a stock trading simulator. These simulators are games where you can participate in free stock trading with fake capital and real stock price tracking. Some of the most popular simulators to practice stock trading are Wall Street Survivor, Investopedia Simulator, and MarketWatch.
Learn About Successful Investors
Studying about great investors from the past will give you inspiration, perspective and instill you with an appreciation for the stock market game. It could even help you come up with good stock trading strategies.
Some of the greats you could read up on are John Templeton, Jesse Livermore, Warren Buffett, Benjamin Graham, Paul Tudor Jones, George Soros, and Peter Lynch, to name a few.
Make Sure That Stock Trading Is The Right Move For You
You should think about trading stocks if you have maxed out 401(k) matching dollars from your employer, as it helps build long-term wealth. Most 401(k) plans do not allow you to buy individual stocks.
Instead, investors select stocks from a plethora of index and mutual funds. However, you can buy and trade stocks within an IRA. In fact, trading within an individual retirement account can be quite lucrative. These types of accounts are tax-advantaged or avoided altogether.
Otherwise, you should consider stock trading if you have contributed towards the maximum amount for your IRA and 401(k) plan. This usually means that you are on the right track to meet your retirement goals.
You must also be willing to take more risks by trading stocks. If you have not yet started saving for retirement, you should start doing so before trading online.
Choose The Right Online Broker
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One of the first things you must do before you start trading online is open a brokerage account with a reputable online stock brokerage firm or agent.
You can get some research done regarding which online stock broker is right for you and your situation. Take into account factors like how intuitive the website or app is, trading commission fees, and whether they provide any educational or research tools.
Nowadays, you have a lot of options to choose from. You could take the help of established giants like Charles Schwab and Fidelity, who have channeled their years of expertise into app-based and online trading tools. You can also help newcomers who specialize in this field, such as Weibull, SoFi, and Robinhood.
Learn About The Various Types Of Stock Trading
Once you have opened a brokerage account and aligned yourself with the right people, you are ready for stock trading. But what stocks should you buy? For beginners, the best place to start is ETFs (Exchange-Traded Funds).
ETFs allow you to buy a bundle of stocks, all at once. This can help if you are unsure about selecting one company over another.
ETFs are built to duplicate major indices such as Nasdaq, S&P 500, and the Dow. These are good places for your portfolio to gain broad exposure to the American stock market.
A lot of traders diversify their holdings with assets such as bonds as well. This is a way of hedging their risk in case stock market downturns occur.
Figure Out What Kind Of Trade Is Right For You
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When you have decided to buy or sell an ETF, a stock, or any other traded asset, you get options for the kind of trade order you would like to place. The two essential types of trade orders are limit orders and market orders.
Limit orders take some time to execute, but they offer you better control over the price you receive or pay for when selling or buying a stock, respectively. On the other hand, market orders are executed very quickly for the best price available at that moment.
Moreover, you should consider implementing a trailing stop loss sell order once you own a stock. This will allow you to ride positive momentum and sell automatically when the trade does not work out in your favor.
Neither of the trade order types is “better” than the other, as they all have their advantages. You should learn about as many types of trade orders as possible to ensure that you are utilizing the right tool for your situation.
Final Thoughts
Online stock trading for beginners can be pretty scary. However, you are not the only one who has ever felt like this. In 2020, about 55 percent of adults invested in the US stock market alone.
Nobody gets it right the first time, and you might lose some money in the process as well.
But, you must remember that it is all a learning curve. The more you do it, the better you will get at it. We are confident that the above-mentioned tips will help you make the right choices.
If you have experience with stock trading or have questions to be asked, feel free to leave a comment below.
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