To start trading on stocks actively, or just to invest for the long-term, there are things you need to know before starting. Knowing what to expect, and what tools you need, will help prepare you so your entry into stock trading goes as smoothly as possible. Here are important things to do before you start trading stocks.
Acquaint Yourself With the Stock Market
Stocks are small pieces of a company. The stock price, (also called a “share”) reflects the value of the company, and its outlook, as determined by the people trading the stock (traders and investors). Stocks don’t have a set price, they continually fluctuate, each second of each day.
You can buy stocks and then try to sell them at a higher price to make a profit or you sell first and try to buy it back at a lower price to make a profit.
Establish Your Purpose For Trading
Is it something you want to do every day? Do you want to trade a couple times per week? Or do you want to buy stocks and hold them for the long-term?
There is no right or wrong here. Do all of them, or one of them. Day trading is taking trades that last less than a day and trades often only last minutes. Swing trading is taking trades that last from a day to several weeks. Investing is taking trades that last many months or even years. Before deciding which to pursue, consider your finances.
Consider Your Finances
Trading doesn’t have a minimum or maximum capital requirement, but to be able to trade stocks of varying price, as opportunities become available, it’s recommended that a reasonable amount be committed to the endeavor.
Practice Before Depositing Money
Practice placing trades. Get used to the various order types available. Begin formulating strategies and testing them on historical price charts.
Trading on stocks is exciting because it involves risk and reward. Starting to trade is the easy part, being successful is another story. At the end of the day, you don’t recline within your shell if you really want to make money.