One of the most common questions people ask when they start to take control of their financial wealth is “ what do i need to do to start trading ”? Stock trading for beginners can be intimidating, but once you get the hang of investing, it won’t seem so threatening. By putting in a bit of time and effort now, you can secure your financial wealth for years to come!
You Need A Stock Broker
If you’re wondering how to invest in stocks, the first thing you need to know is that you need a stock broker. This broker will basically facilitate trades for you. Stocks aren’t like your normal goods where you can just drive down to the store and pick something up off the shelf. Stocks are traded through stock exchanges, and the exchanges themselves need someone to facilitate them. For smaller individual investors, this means a broker. There are tons of options when it comes to brokerages. E-trade, Scottrade, Interactive Brokers, the list goes on and on. This isn’t the place to tell you which brokerage is the best brokerage. Fact is, each one will have its own advantages and disadvantages.
Your Broker and Your Trading Strategy
One thing you should consider when selecting a brokerage is your own trading strategy, and which brokerage best suits your needs. For example, if you’re working to develop some day trading strategies, you should probably consider brokerages that charge low fees for trades, or offer bulk discounts for high-frequency traders. As a day trader you’ll be executing a lot of trades each day, so fees will really add up. On the other hand if you’re a value investor and will be making only a few trades here and there, and then holding onto your stocks for a long time, you won’t have to worry as much about the price per trade and should look at other factors, like how much access to valuable research will the broker provide. Also, some brokers specialize in very specific things, like penny stocks, and they can provide you with valuable information on which penny stocks to buy, so make sure you consider this also.
Getting Started: Developing a Strategy
Play your strengths
Once you have a broker it’s time to get started. Each trader will have to develop his or her own trading strategy. It’s often a good idea to play to your strengths. What types of things interest you? Where have you focused your career? For example, if you work in the tech industry, say cloud computing, perhaps your best bet would be to focus on tech stocks. Of course, you should always diversify and not pour all of your money into one stock or one industry, but tech stocks could be your “bread and butter”, so to speak. Or perhaps you are an oil and gas engineer. In this case you should see if your deep industry knowledge could provide you with some competitive advantages if you invest in oil and gas.
Consider your stage in life and career
You should also ask yourself what you’re trying to do. Everyone wants to get rich, of course, but the higher the upside on a stock, generally the higher the risk. If you’re a retiree living on a fixed income, perhaps a high-risk strategy isn’t such a hot idea. If that’s the case then you should consider lower risk strategies, such as investing in blue chips. On the other hand, if you’re younger and you have some money you can afford to gamble with, you can consider higher risk strategies, like investing in penny stocks and hot new tech companies.
If you’ve got your whole career ahead of you, it’ll be easier for you to recoup your losses if investments turn south. On the other hand, if you strike it big you might find yourself in line for an early retirement. If you’ve got some time on your hands and a bit of risk capital you could also learn day trading. However, this is a generally high maintenance strategy that requires a lot of effort on your part, so make sure you have the time. There are many different types of stock traders, so make sure you consider which kind you’d like to be!
Be Serious About Trading Hardware
Besides developing your strategy and finding a broker, we also recommend serious traders consider serious hardware, such as trading computers. If you’re running powerful analysis tools and trading platforms, it could strain your every-day computer. A computer designed specifically for trading will be designed to handle all of these resource intensive programs. Trading computers are also very reliable because the companies that build computers for trading understand that even a day of downtime due to a broken computer could cost people a lot of money. Another thing worth considering is a multi-monitor desk and a multiple monitor setup. This type of setup will give you plenty of visual space for charts, reports, and other things.
We’ve only introduced you to some of the most basic concepts of trading. Fact is, trading can be a strenuous but also very rewarding activity. You’ll have to put in a bit of time and effort, but if you do you’ll find yourself well rewarded! Just make sure you study up before you start throwing around your money!