Everybody you see buying and selling stocks is not necessarily a stock trader. There are two general camps that are used to classify investors. Basically, one can be an investor or a trader depending on the frequency of their transactions.
Even though there is no 100% guarantee of getting returns from an investment, you can set yourself up for success. This is done by first making sure that you choose an amicable trading platform that has the right features.
Working with an easy platform that functions almost like a human but at high efficiency is crucial. To make the best selection of a trading platform, consider the following factors:
eToro provides you with one of the most convenient platforms to conduct your trading operations. Officially launched in 2007, this platform deals with a wide range of assets, including stocks.
One of the most outstanding features of the platform is the simplicity in which you can execute a copy trade. Thus, eToro has a wide range of traders who would like to use copy trading while incurring the least risk level possible.
Opening an account on eToro needs not more than $200. U.S. and Australia residents need just $50. Withdrawal is also simplified with the availability of several channels through which you can access your money.
For you to start trading stocks, you need to first of all sign up on the trading platform. Here is a simplified 4-step process to get you started.
Continue reading below to find a practical example of how you can trade in stocks using an actual trading platform – Toro.
With your eToro account ready and deposited funds reflecting in it, you are set to begin trading in stocks. Use the steps shared above to create this account. eToro has a feature called margin trading. This is a way to lend you money up to 5 times your current account balance. Margin trading feature comes in handy such that your potential gains are increased.
Before you can put your real money out there, you need to practice some precautions to ensure your money does not go to waste. Make sure that you have gasped the tenets of stock trading and that you are aware of the stocks you want to buy and invest in.
Some of the most popular stocks on eToro include:
Investigating stocks is similar to buying a car or any other electrical item. You can purely consider technical aspects, but you also need to factor in the feel when using, the reputation of the manufacture, and whether you are comfortable with the color.
Stock research is technically dubbed fundamental analysis. It is an important step before trading in any stock.
Key steps to investigating stock are:
You need to put together a couple of the company’s materials that would be used in reviewing the company’s financials. These documents can be obtained from the U.S. Securities and Exchange Commission. They include:
The financial reports have tons of numbers and these can easily get you confused. Therefore, you need to zero in on the key areas to ensure that you are getting exactly what you need.
The above two steps are all about quantitative research. You also need to factor in qualitative research to help you have a better grasp of the chosen stock. Some of the questions you could be asking here include:
There are endless metrics that can be looked at when investigating stocks. However, just considering the company’s revenue or income for a particular year paints an incomplete picture. Prior to purchasing a stock, be sure that you have the complete narrative of the company and any worthy long-term partnerships.
Deeply dig into historical data when evaluating the company from a long-term perspective. Doing so will help you understand how the company maneuvers through hard times. You will also gain knowledge of how it has been improving its performance and providing value to shareholders over time.
To finalize your investigation, compare the numbers and ratios to know how the company fits into the big picture. Be sure to make use of research tools that most stock brokers provide freely.
Your ability to succeed in stock trading boils down to one thing – what strategy are you using? If you use the right strategy that you’ve properly mastered, then you are bound to get more gains. Equally, a wrong strategy will see you incur more losses.
Here are some strategies that you might want to consider:
Day trading is the most popular stock trading strategy. Just as the name indicates, the strategy involves buying and selling stocks within the same day. No position is held overnight but rather is closed on the same day that they are taken.
Position Trading is mostly considered to be a Buy-and-Hold strategy that can go on for a number of days and weeks depending on the trend. Trend leaders are more interested in higher highs or lower highs as a way of determining the trend of a security. By following along the “wave”, trend leaders are best positioned to benefit both from a market upside and downside.
Swing Traders are brought into the picture at the point when a trend breaks. High price volatility is often recorded when a trend ends and a new one begins to establish itself. At this point, swing traders will either buy or sell. A swing trade can be held for more than a day but does not last longer than trend trades.
Bid-ask spreads normally cause price gaps and these are exactly what the scalping strategy exploits. The trader will basically buy at the bid price and sell at the ask price to make a profit from the difference. To reduce the risks associated with this strategy, scalpers hold their position for a short time.
Your main motivation for buying a stock is normally to make a profit. A trader makes money in stock trading when the stock appreciates in value and is worth more than what was paid for to buy it.
View it in this angle – the stock is bought at a lower price and sold at a higher price. The positive difference is what makes you money.
Trading stocks is not a hard thing to do. It only becomes a challenge when you have to choose companies that consistently beat the stock markets.
That is not something most people have what it takes to do. Therefore, you are bound to hunt for tips and tricks to put you ahead. The following are some tips that you can use when trading stocks:
A successful investor is not necessarily one that has a high IQ level. The most successful ones are the ones who have been able to control their urges that often create trouble during trading.
If you are an investor looking for a long-term, wealth-building, and market-beating opportunity, then you need to follow this nugget of wisdom from Warren Buffet.
Whenever you trade, never let your head drive your trading decisions. Doing so would easily see you make massive losses. Such decisions are tied purely on the greed to make more money rather than facts and guts.
In any trading activity, cultivate temperament for long-term success.
As profitable as investing in stocks is, any kind of investment is associated with its own set of risks. Thus, you need to determine the amount of capital you would risk on each trade. Most of the successful traders are the ones who have been risking only 1% to 2% of their account per trade.
Another important consideration is to always invest what you would be willing to lose. As we have mentioned, unforeseen events can happen and when they do, you do not want to be sent into financial jeopardy because of the risks taken.
When Day Trading, most orders placed by investors and traders will start to execute immediately the markets are opened in the market. That is a feature that has often contributed to high price volatility.
As a seasoned trader, you can easily spot patterns and choose the most profitable. However, if you are a beginner, the best approach would be to first read the markets for about 20 minutes without making any move. As you approach the middle hours which are less volatile, you can take a preferred move.
Also, the rush hours are known to have many opportunities. However, beginners are advised to avoid them until they are ready.
Make a decision regarding the type of order you’d want to use to enter and exit trades. You have the option to use either limit orders or market orders.
A market order is normally executed at the price available at the time of its placement. That does not give any price guarantee.
On the other hand, limit orders guarantee prices but not execution. With a limit order, you are able to trade with increased precision since you set the buying and selling price. Sophisticated traders are known to implement options strategies to hedge their positions.
Stock trading is a highly profitable engagement. You probably have read lots of articles and stories of how people were able to turn around their lives with it. These may be true, but there are also many others who have lost money in it.
Thus, do not get into it waiting to start making money at an instant. You may win just 50% to 60% of your trade. Thus, be sure to affirm that the risk on the trade taken is limited to a certain percentage of your account.
As you get into stock trading, you will come across some terms that may get you confused. Here are some terminologies and jargons that seasoned traders have become accustomed to.
Stock trading can be an exciting venture but only if you know what you are doing. You need to have all the facts with you before you can invest in this risky yet profitable venture. More importantly, never be led by your head in trading decisions.
If you want a platform to carry out your stock trading operations, we recommend that you have a look at eToro. The versatile platform has all the features which are sure to enhance your experience.
Disclaimer: Please note that the articles, news, reviews and all the content of this website should not be considered as a trading advice. The nature of investing is speculative and there is a risk to lose the invested capital completely. When investing seek a professional advice and make your own due dilligence. This site is not intended for use in countries where trading and investing is prohibited. This website is free for you to use but we may receive remuneration from the companies we feature on this site.