5 Things You Should Know About Trading Stocks
Stocks and investing. This is something that i Have been doing on and off for quite a while now. I may not be rolling in dough at the moment, but I like to know I have some kind of fall back security from stocks.
Technology has made it easier for people to trade in stocks. In fact, you can buy and sell shares of different companies around the world without going to their specific stock exchanges. Since there are four markets (London, New York, Tokyo and Sydney) that are in different time zones, it’s possible to trade stocks 24 hours from Monday to Friday. Most people think that trading stocks is a get rich quick scheme. The truth is that trading in stocks is a business like any other where profits and losses are part of the game. Many traders fail in this business because they venture into it without knowledge. This is because they desire to get rich much faster. Below is a list of the things that you should know before venturing into the world of stocks trading.
Get a Trading Platform
It’s obvious that there are many brokers on the internet. However, majority of them don’t have a platform for CFDs (Commodity for Difference) trading. You should therefore look for a broker that allows investors to use their platform to buy and sell shares virtually. This is because you can’t trade in stocks without such a platform. Make sure that the CFDs broker is registered by the government and other financial regulators. You should look for a broker that offers excellent customer service such as tradedirect365.com.au because they are always available when you want to make an inquiry.
You Buy at Low Price Sell When Price is High
When you trade in currencies (forex) there is potential to make profit regardless of whether the market is going up or down. Stocks are a little bit different because you can only make money when the value of a stock appreciates. With this in mind, you should only buy stocks that are trading at the lowest prices so that you can dispose them later when they gain value and make your kill. It’s therefore stupid to buy stocks that have already appreciated. Buying low is wiser because you spend less and yet stand a chance of making more when the value of the stock skyrockets.
The stock market is driven by economic and political events. When you see a big move happen in the markets, it has been triggered by either a political or an economic event. As a matter of fact, financial and political news are released every hour of the day. For instance, when the central bank of England or Japan announces an increase in interest rate, there are traders who see such news as a threat to their investment. This may cause them to dispose their stocks. Alternatively, the news might cause people to develop an interest in a certain stock, triggering mass buying. Political and economic events can cause the value of stocks in the affected country to go up or down.
There are No Dividends for Stock Traders
A stock trader is not entitled to any dividends like the traditional investors who buy shares from brick and mortar stock exchanges. As an online stock trader, you only make money when the value of the stock appreciates and record losses when its value goes down. Losses and profits are distributed randomly. In fact, you should regard such loses as the cost of doing business. Maximize your chances of making more money by trading in several stocks.
You should never attempt to trade without a strategy. A strategy is basically a set of rules that defines your entries and exits (when is it time to buy or sell). If you trade without a strategy, you will be gambling with your hard earned money. The good thing is that there are many trading strategies on the internet. You just need to select the one that you understand better and stick to it until payday.