Among the many securities you can invest in, the stock market seems to be the best start-up option because of its simplicity. Options and futures are somewhat reserved for more advanced level investors and traders. Nonetheless, it will take some time and dedication to learn and gain footing on the stock market before you can start trading and profiting. You’ll have to familiarize yourself with trading jargon like bulls and bears, candlestick charts, rallying, etc.
Next, you need to know the three parts of stock trading, namely technical analysis, fundamental analysis, and psychological analysis. Technical analysis involves different charting systems like the Japanese Candlestick, MACD, Stochastic, and support/resistance. Fundamental analysis involves the company’s past and present performance, dividends to shareholders, latest projects or products, and other news reports that could excite the market. Psychological analysis talks about the tendencies of consumers. It aims to understand how a consumer thinks and reacts.
When entering the stock market, you’ll find different stock indexes. Do not let it overwhelm you as it simply denotes different stock segments and their current market values. Some of the most popular stock indexes include NASDAQ, Dow Jones Industrial Average, and S&P 500.
Do not rely on any one tool for analyzing a stock’s value and direction. A common mistake by most novice traders is that they spend days learning one tool, such as candlestick patterns, and then start trading immediately afterwards. No one tool is 100 percent accurate so you’ll have to combine it with other tools.
Understand long-term and short-term trading. There are three different types of trading – day trading, swing trading, and long-term trading. Day trading involves buying a stock and then selling it the same day. Swing trading involves buying a stock and then keeping it for a few days or weeks before selling it. Long-term trading involves buying a stock and keeping it for months or years. Know which trader you are.
Keep in mind that day trading is not always the best account for you to manage. It does seem like you can earn significant short-term profit, but it could also cost money. Brokerage fees and short-term trading taxes of up to 35 percent could dilute your earnings.
Find a stockbroker you are comfortable with. There are many online brokerage platforms today that you can open an account with little to no requirements. Look for a brokerage firm that offers a dynamic set of features including trading simulators, analysis tools, 24/7 customer support, and low per trade charges. The stockbroker you work with greatly impacts your ability to trade for the long run, so be sure to find only the best possible choice.