The prospect of making money in the stock market today lures many people into trading rather than sticking to long-term investments. With the beginning of the COVID pandemic, the volume of intraday trades has grown tremendously. Some people have turned to trading to diversify their income, while some just trade for fun. Regardless of your motivation, there are a few recommendations you can follow to eliminate losses and increase your chances of success. Find out how to do it from this article.
Trading vs. Investing
To begin with, you should clearly understand the difference between investing and trading. Traditionally, the stock market is viewed as a place for long-term investments that take years to pay off in the form of dividends and/or as a result of future price appreciation. Nowadays, though, people look at it as an opportunity for short-term gains achieved as a result of frequent buying and selling activities.
Why Trade Stocks
The advantages of the trading approach are pretty obvious. It can bring quick returns when compared to the old-school investing strategy. Plus, it offers various strategies, allowing traders to capitalize on both uptrend and downtrend markets. Finally, the process itself is very exciting and requires a lot of analytical thinking and risk management skills. However, trading is rather risky, especially for beginners. This is why anyone planning to start it, should go through several stages of preparation.
1. Pick a Broker
Part of your future success depends on the conditions you pick. This is why you should bother to spend time comparing the trading conditions of different brokers. As a trader, you are interested in the lowest spreads and commission-free transactions. Don’t forget, though, conditions that look too good to be true, probably aren’t that good. Mind that there is room for fraudulent activities in this sphere, same as anywhere else. To avoid falling prey to pseudo brokers, check reviews on reliable resources, e.g. Trustpilot.
2. Open a Trading Account
How to Learn Stock Trading for Free?
No theory will teach you to trade as much as practice. In order to start trading, you need to open a trading account. "Isn’t it too risky to open a trading account with no knowledge?" you might ask. Not if you start with a demo account. Demo or teaching account shows the actual situation in the market and allows you to open and close trades following real-time price movements. Plus, you have an opportunity to get used to the trading terminal and backtest your strategy. It’s risk-free as it doesn’t involve any deposits from the trader’s side.
Once you feel confident in your skills, open a regular trading account and make a deposit to place your first real trade. Traders say there is a difference between trading using a demo account and trading real money. It is about human psychology that the fear of losing funds may urge a trader into irrational moves, for example closing an order sooner than necessary. The ability to overcome these fears can be mastered in the real trading process. Nevertheless, it is not a good idea to invest a lot of money in the initial stages. Remember that the golden rule of investing goes like this "Don’t risk more than you can afford to lose."
Read more: Where to Invest $1,000 in the Stock Market
3. Learn Stock Trading Basics
There are certain things that you cannot do without in trading. For instance, knowing the basic terms of the market and understanding the difference between types of orders will help. You should learn the difference between market orders, limit orders, and their variations. Make sure you are familiar with all essentials before placing your first trade. All of them can be found online. Good brokers provide some sort of educational materials on their websites. Use it to your advantage.
4. Master Technical and Fundamental Analysis
Trading is not betting. The success of your trades depends on the analysis you have done and the strategy you have developed accordingly. It might sound intimidating to those who have never traded before, but it is not that hard if you start with the basics. Learning to read charts and using technical indicators will pay off. Once you know how to analyze price trends and trading volume, you will enhance your strategy and achieve greater results.
Read more: Best Stock Indicators
Stock prices depend on various economic factors. This is why following major economic events is essential for a professional trader. Knowing what is going on in the financial market will help you draw conclusions about the fair stock value and adjust your trading plan accordingly. Plus, fundamental analysis deals with the examination of companies’ earnings and their competitors. You can subscribe to JustMarkets newsletters to receive daily market overviews.
5. Do the Reading
There is a lot you can learn by reading specialized literature. Books like Reminiscences of a stock operator and Trade your way to financial freedom will arm you with helpful insights and inspiration from experienced traders. Also, a treasure trove of useful information can be found in blogs, Youtube channels, and articles. A lot of it will be advertisements so your task is to filter the information you can use. The same can be told about offline courses.
You can find a lot of helpful information about trading in the financial markets in the JustMarkets articles section.
There are a few steps you cannot skip if you want to succeed in the stock market. Finding a reputable broker with advantageous trading conditions is the one to start with. Learning basic concepts is a must, but to succeed you have to practice. The best and easiest way to do it is to start with a demo account. It is possible to learn stock trading online, although attending courses and seminars offline might give you some additional insights.
JustMarkets is an international broker with clients from 197 countries. Millions of people have already opened trading accounts on JustMarkets to benefit from the best conditions, including low spreads, commission-free withdrawals, and a helpful team of support, working round the clock to ensure that each of our clients has the most convenient trading experience.
Open a demo account on JustMarkets to try your hand at currency trading. It’s a risk-free way to learn to trade in the most liquid financial market. A teaching account will help you learn the basics of FX trading and develop your own trading strategy before you invest any money. Learn trading today to take care of your future tomorrow.