With a market cap of $22.48 trillion, the New York Stock Exchange (NYSE) is the leading stock exchange in the world. On average, of over a billion shares involving thousands of companies and investors are traded every day on the NYSE.
Many trading investors find the stock business to be a lucrative opportunity to make a lot of money quickly. We have all heard astonishing success stories of traders who made billions overnight. How do they really do it?
At a glance, stock trading is quite straightforward; it’s all about buying the right stocks and selling them at the right time.
Well, it’s not that simple. There is a lot more that goes into trading stocks. You have to know which stocks to buy, when to sell, how to sell, avoid losses and traps, and prepare yourself financially and mentally for trading.
Stock trading is a business like any other. There are good and bad times. To maximize the good times, here are five tips on how to trade stocks online and increase your chances of success.
In This Post:
1. Knowledge is Power: Learn How to Trade Stocks Online
Before you get started on anything, get yourself some education or training on stock trading. Besides learning how to trade, part of the training should give you an idea of whether stock trading is the right venture for you.
There are tons of educational resources on stock trading, stock markets, and stock news. You could teach yourself using free learning material or invest in a paid course.
Paid courses vary in content, complexity, scope, duration, and delivery. Some are live conferences and webinars, and others are pre-recorded videos, PDFs and e-books.
Different courses teach different approaches to trading, which are often coined and derived from trading gurus. But the underlying principles are the same. The training costs also vary as well from a few dollars to thousands of dollars.
Get your training from reputable educators such a Udemy, or from successful traders looking to share their insights and knowledge.
Remember that learning is an ongoing process. Even as you trade, learning new tactics and ideas will come in handy.
2. Set Aside Some Funds and Some Time
Stock trading is an involving and demanding business. You have to set aside some time and money to keep going.
Insufficient funds is often a problem, especially for new traders. Stocks are typically sold in bundles of hundreds, even for minimum orders. For instance, if you want to buy $50 shares with a minimum order of 200 shares, you’ll spend $10,000 just to invest in that one company.
For most day traders, each trade risks between 1% and 2% of their trading account capital. You also need to think about trading commissions and fees. Therefore, you need a lot of money just to get started and prepared for loses.
Stock trading requires a lot of time if you are at it by yourself. You need to keep track of market trends, spot opportunities, and make transactions. Although software trading tools now automate most of this work, you still have to put in a lot of your spare time.
3. Chose a Good Online Broker
A stockbroker is a licensed professional who serves as a middleman between the stock exchange and the trader. Brokers make transactions on behalf of their clients and manage their financial portfolios. Most online brokers charge a $4 to $12 flat rate on each trade and an extra fee for managing the trading account.
To get the services of an online broker, you have to create a brokerage account. Different accounts have different features, running costs, and services.
You could, of course, choose to trade without a stockbroker. However, that could be risky, expensive, and tedious. In fact, many traders find it impossible.
A stockbroker manages the risks through accountability and bridges the hierarchy structure between an individual trader and the stock exchange.
In addition, reputable brokers include proprietary analytics and research tools in their brokerage accounts. In most cases, you’ll have to pay more for additional services, but they are worth it.
4. Stick to a Trading Plan
Stock trading requires precise planning. To manage loses and avoid surprises, you must plan on when to pull out of a falling stock, how much to invest, and when to buy.
Many new traders start small and build up to huge investments. The idea is not to get excited by winnings or discouraged by losses. This may lead you to make emotion-guided moves instead of following facts.
Stick to a pre-determined plan, but don’t be afraid to make reasonable adjustments along the way. Make, for instance, a stop-loss order that triggers an automatic sale of the stock when its value drops below a particular threshold to track and minimize losses.
Also, have in place a contingency plan so that you have something to fall back on if things go wrong.
5. Use Technology to Your Advantage
Success in stock trading heavily depends on having the right information at the right time. Fortunately, technologies such as Big Data, Artificial Intelligence, and Machine Learning have advanced enough in recent years to develop powerful trading analytics and research solutions.
There is a vast selection of free and commercial stock market analysis software available today. Most of these tools use cutting-edge digital technology to study the stock market and make fairly accurate predictions of future trends.
To get ahead of the market trends, you need to seek out these data crunching systems. Prices on premium software vary within the range of a few hundred dollars on monthly or annual subscriptions. Features and functions also vary to suit different traders and trading styles.
The Bottom Line
Stock trading is hard work. It takes time, resources, and experience to learn how to trade stocks online. Traders who put in their dedication, patience, and discipline in the industry drastically increase their success rates.
The important thing is to continue learning and to keep a close eye on market trends. Always keep in mind that you are investing in companies — not stocks. Prioritize on researching the companies and their previous experiences in the stock market to make sound predictions.
Thicken your skin, play smart, and don’t let emotions cloud your judgment. Check out our blog for more informative articles.