Its amazing how much stock trading has evolved over the decades. Thanks to the Internet and advancements in technology, it has never been as easy and safe to trade stocks… and actually make money.
Whether you’re interested in entering the market yourself or just curious of the possibilities, remember that stock trading is 90% mental. Getting over the fear of losing money is what holds most traders back and actually causes them to lose money. If you can think it, you can do it.
3 Myths of stock trading
- You need a fancy degree to trade stocks. This couldn’t be further from the truth. In fact most professional stock brokers don’t even have a college degree and only need to pass a certification test to trade stocks professionally.
- You need thousands of dollars to start trading stocks. While this used to be the case, now there are several online discount stock brokerages that have cut down commissions and minimum balances. Unlike before, you can easily hold a couple strong stock positions for just $500.
- You need to sit by the computer all day to trade stocks. While you can if you want, most people actually don’t and, in some cases, its probably better if you don’t. With all the available mobile trading apps and trading strategies, you can virtually trade and keep up with the market from anywhere. See brokerages that offer mobile trading.
How to start trading stocks
There are only 3 steps to start trading stocks: open an account, fund your account, and start trading. Learn how to open a stock brokerage account.
Even if you’re not completely ready to start trading, it is a good idea to have your account up and running so you get hit the ground running once you feel confident; however, in the meantime you can always practice your trading with virtual stock trading applications.
How do I know what stocks to trade
The answer is not always easy. Depending on how much money you’re using, your time frame, and the risk you’re willing to take, there are different trading strategies that will work for different people. The key is to find what strategy works best for you. See 40+ stock traders to follow on twitter.
This is best done through stock trading education also known as research.
Are you into patterns or would you rather look at numbers? Obviously, you could do a mix of both, but what would you put emphasis on? If you like patterns, then you’ll be more inclined to use technical analysis. If you prefer more number crunching, then you’ll like using fundamental analysis. See 4 reasons why I like to use technical analysis.
What is your trading style? To find the solution, ask yourself these questions:
- Are you looking for primary or secondary income?
- What risk are you willing to take? Can you afford to lose this money?
- How much time are you willing to invest?
Answering these questions will help you figure out what’s the best trading style for you. A couple of broad trading styles include:
- Classic buy and hold – Buy a basket of stocks and forget about them. Using this method, you won’t necessarily make the quickest money but investing in solid companies will result in a decent gain without much work or worrying.
- Active/Day trader – If you want to make a full-time income with stock trading, then you’ll most likely fall into this trading style. While the profits can be huge, so can the losses. See best brokerage for active traders.
- Swing trader – Also known as trend traders, this trading style sits in the middle of the classic buy and hold and day traders. You’re looking to hold stocks for a couple weeks or months and ride out short-term trends.
As you practice more and gain more experience, eventually your own trading identity will start to evolve. You’ll come up with your own rules and guidelines, and start pumping out profitable stock trades like a fine-tuned machine.