Stock Trading: How To Trade Stocks
Stock trading seems like a glamorous lifestyle if you follow traders who have earned a substantial amount of money from trades. Sure, stock market trading seems simple enough. You invest money into a stock, wait for the stock to increase (exponentially, of course), and then boom, you’re rich! The truth is, stock market trading isn’t that simple and does require some skill. Also, you can’t expect to get wealthy from penny investments overnight.
With so many options and variability, the stock market is an intricate web full of possibilities (both positive and negative). So how does one trade stocks? What is the secret to online stock trading? We’ll take you through the steps to help you on your way to success.
Before we get into the how of stock trading, it’s probably best that we go over what IS stock trading. Stock trading boils down to the buying and selling of stocks or shares of a company. A share means that you have partial ownership of the company. Let’s say that you work for a restaurant; A perk of working for that restaurant is that you are eligible to have a certain amount taken out of your paycheck each week and put towards the stock.
What is stock trading? – South Africa
What this means is, you’d be buying shares of the restaurant each week in hopes that the price of that share will go up over time. Companies will sell shares as a way to raise money for their business-related activities. The price for shares typically fluctuates. You may buy three shares of a company for $5 apiece, and then two months from that purchase date, the shares may be with $6 apiece. Should you choose to sell your shares of the company at that time, you would make a $3 profit. Of course, there is no guarantee of how your share will fluctuate.
The shares you purchase may steadily decrease for months and months and months, then one day they suddenly spike up. The opposite is true too, your shares may steadily increase and then one day plummet. Stock trading is risky and requires skills to plan and predict when to buy or sell your trades.
Online Stock Trading vs. Traditional Personal Broker Trading
There are essentially two paths that a stock trader can go down: online stock trading or a traditional personal broker trading. The main difference between the two types of trading is that online stock trading allows more flexibility and freedom, whereas relying on a broker means that you have to funnel all decisions and exchanges through them, and then they act on your decision at their earliest convenience. Basically, online stock trading eliminates the middle-man.
Both avenues have perks and downfalls, but more and more people are moving towards online stock trading for several reasons. The cost of online stock trading is much lower, as you don’t need to pay the traditional brokerage fees. There are a multitude of online platforms available that incorporate low fees for trading. Online stock trading occurs 24/7, meaning you don’t have to adhere to traditional brokerage firms’ typical nine-to-five limitations. The increase in hours is appealing to those who hold day jobs and cannot monitor and make decisions during work hours. It’s no surprise that the amount of information online is vast and continuously growing. It’s much easier for online trading platforms to keep up with the incoming data and update their graphs in real-time than traditional brokerage firms, and information is everything in the trading business.
How to trade stocks- South Africa
From the information we’ve provided above, it seems like online stock trading would be an obvious choice, but there are some advantages associated with traditional brokerage firms. The most significant benefit is the one-on-one relationship that you will develop with your broker. They will know your goals and work with you to help you meet them. Online trading platforms are more of a DIY approach but don’t get us wrong, online platforms often do come with some sort of consultation or assistance if needed, but you aren’t guaranteed to work with the same person consistently. New traders who feel particularly fearful of the trading market may prefer to have a one-on-one relationship with a broker to calm their nerves and feel more confident in their decision; there’s online stock trading for the rest of you.
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How to Trade Stocks
Do you want to trade stocks, but you aren’t sure where to start? Fear not, we’ve got you covered. We provide a step by step guide to help you initiate online stock trading below.
Step 1: What are your goals?
Before you get started in online stock trading, you’ll need to determine what kind of stocks you are interested in. If you’re interested in buying shares for Netflix, then this will inform the trading platform that you choose as not all platforms have access to all stocks. Figuring out the stocks you are interested in really a personal choice and is dependent on your goals. Do you want to buy shares and hold onto them for a while, assuming that the shares will grow exponentially over time, or do you want to buy shares with the hope of selling them after a short period of time? Both methods of stock trading are okay; it really just depends on what your goals are!
Step 2: Learn about the stock market.
This step is especially true for novice traders. The stock market has a lot of “hacks” and requires strategizing. Familiarize yourself with the terminology, common strategies, investing tips, etc. YouTube offers many free resources to help you develop a well-rounded foundation on the stock market. There are also several websites and books geared towards teaching beginners the ins and outs of trading. The resources you seek out will depend on your goals, but before you dive into the online stock trading world, we highly recommend taking the time to educate yourself. Reading this article is a great start!
Step 3: Find a Platform that matches your goals.
Once you’ve determined your goals and have done your homework on building a stock market foundational knowledge, you’ll want to find an online stock trading platform. This part is easy; just type into your search engine “online trading platforms for X stock,” and a variety of platforms should come up. Are you not sure which platform to choose? Check out our reviews on common online trading platforms throughout the blog for an unbiased review of the platform. We say this in all of our reviews, but we’ll say it here too when choosing an online platform, it’s important to consult with multiple pieces of information to get a full spectrum of knowledge. While we strive to provide objective reviews, you should also seek out information from other sources to make sure you’re well informed.
Step 4: Open an online trading account
You’ve narrowed down the stocks you’re interested in trading and found a platform; now what? You open an account! Most platforms will allow you to open an account for free, so it won’t hurt to open an account and check out the platform itself. If you encounter a platform that does require a minimum deposit to open an account, fear not; if you don’t love the platform, you can always withdraw the initial deposit. Most online trading platforms also provide their users with demo accounts so they can practice trading and familiarize themselves with the platform and data. Take full advantage of the demo account! The demo account will often include a set amount of virtual money, and there’s no risk in practicing with pretend money. Practicing helps ensure that you like the interface and can help you develop strategies. Again, take advantage of this opportunity!
Step 5: Learn how to read the charts
You will never have too much knowledge about the stock market, I promise! In this step, you’ll want to learn how to read the graphs and charts on your online platform. We’ve included this step here instead of lumping it into step 2 because it is easier to learn when you have relatable examples and have settled on the platform you’ll be using. Use your demo account and online resources to learn how to read the charts and graphs on your platform. Each platform’s charts and graphs will vary slightly, so that’s why it’s essential to learn how to navigate your specific platform. If you skip this step, you’ll be trading without much of a strategy, which is risky.
Step 6: Start your Live Trading
You’ve made it this far, congratulations! Now you get to put your work into practice and start live tradings. As with all stock trading, there is a risk that you will lose money. Make sure you are investing money that you could stand to lose if things turn South. Of course, we hope that things work out in your favor and you make money, though! You’ll want to monitor the graphs and charts of the stocks you have bought into and plan a strategy for when you’ll exit the market. Track everything and make adjustments as you learn; this will help refine your skills and will help you recognize when to enter or exit a market.
As always, we hope that you’ll make well-informed decisions regarding your stock trading and seek out information from multiple sources. Have fun and happy trading!