Investing and trading of stock has been increasing in popularity more lately, and it is rapidly growing day after day, but trading stock isn’t for a child who doesn’t know what is going on in the market but for the smart one who can crack the market wall it is possible to know how to trade stocks and win.
The trading stock has become so easy that it can be done even from the comfort of your small couch. If you know what you are doing you can place your first trade and win.
Knowing the basics of the stock market will help a first-timer investor lot more, you need to learn than ignoring the process.
Before you start trading in the stock market be confident enough and know what to do, thinks like choosing the right stocks, picking a brokerage, and placing a trade must be greatly determine by the trader.
What Is Stock Trading?
Stock trading is the process of participating in the stock market and trade with others on the stock exchange floor to make a profit.
In a more simpler term, it is the act of buying and selling stocks to make profits.
A stock trader is then an individual or company who buys and sells stocks.
Traders capitalizes on the daily price fluctuations; short term traders make their few coins within a minute, hour or day, while the long term traders hold for weeks, months, years or even decades.
What Is Stock Exchange?
The stock exchange is a place full of companies who are ready to sell their company share to keep the company in operations, you can own a share by participating in the stock exchange market, to own a part of any company you must buy its shares.
In Nigeria many financial investment platforms have made it easy for everyone to trade the stock market, sites like Trove, Chaka, Bamboo, Wealth.ng and Risevest, have made it possible to invest with local and foreign companies within the stock market if you want to trade with the international stock market alone platforms like Robinhood, and E-Trade good to try.
How To Trade Stocks
If it is your first time trying to place a trade in the stock market, it is best to understand that most investors are best known to keep things simple and invest in a diversified mix of low-cost index funds to succeed and this is what is keeping them stable in the market.
To begin stock trading here are the things you must do;
1. Open A Brokerage Account
You first need a brokerage account and it must be funded, it doesn’t necessarily mean you are to fund your account immediately after opening, you can do so when you are ready trade.
To make everything quick, you can open an account with an online broker and get it set up in a few minutes.
2. Have A Budget
The stock market trading requires a budget from you, this will help you know how much you want to invest and how to go about it, and it determine how this new venture will not affect your overall financial goals, it helps you make wise financial decisions.
Know how much you are ready to invest and how much you prepared to lose, budget will help you plan everything and stick to olan to stay on the right track in your financial journey no matter what the outcome maybe, of course, you can either gain or loss in the market.
3. Use Market Orders and Limit Orders
Since you have your brokerage account and the budget in place, you are willing to place your first trade and this can be done through an online broker’s website or trading platform.
Sound nice right, you want to place your first trade, on the way there, options to order types greatly determines how your trade goes. Choose the right ones.
Anytime you are buying or selling a stock, there are different types of trade orders you can place but will have two basic types, which are the market orders and limit orders.
Market orders process, or “execute,” instantly. The asset you are trading goes for the best price available at that moment.
Limit orders give you greater control over the price you pay (or receive, when selling). They won’t necessarily execute immediately.
Instead, you can set a price at which you will buy or sell a certain asset and this gives you greater control to get the most profit possible.
When you own a stock placing a trailing stop-loss sell order might consider, as this will help you to retain the stock as long as the price is going up and automatically sell when the price drops past a certain point.
4. Practice With A Virtual/Demo Trading Account
You may not be a pro yet then it is better to practice with a virtual trading account before you do it with real money.
Most online stock brokers will provide investors with tools that can help them build trading acumen and also tools to check on performance on the virtual/demo account before jumping into the live account and risk their hard-earned money, make sure you practice.
5. Measure Returns Against An Appropriate Benchmark And Keep Your Perspective
Measuring results is key, as an investor you need to be able to outperform the benchmark then maybe you should go for a low-cost index mutual fund or ETF that you have a close benchmark indexes performance for.
It is sometimes hard even for the pro stock traders to measure but if your returns are not somewhere close to your set benchmark then look for other investments within the stock market.
Stick to your thing; don’t be confused by the multitude and never see the stock market as a place to get quick riches.
Best Way To Survive Stock Trading
You can do it safely, I mean stock trading, anytime you fall on the investor-trader spectrum, here are the four tips on how to trade stocks that guarantee your safety.
- Choose your broker wisely
- Building positions gradually to lower your risk
- Don’t follow hot tips provided by others instead do your own thing
- Keep good records for the IRS