In 2020, people are talking more than ever about trading and making a passive income. You have probably heard at least one friend saying trading is an investment or trading already themselves. So, is there some stock trading guide for beginners?
Here, we will show you precisely what you should know as someone who wants to start stock trading or be more informed during a conversation. Let’s see how it goes with stocks. You might end up trading together with your friend!
1. Decide which the right strategy for you
Trading stocks might be profitable for you if you have a steady income. Usually, you buy and trade stocks using an account for trading only. Many don’t know that there is also an IRA option, where trading can be beneficial because IRA accounts have more tax advantages, and they might be even avoided entirely. You could have an IRA account if you contributed the annual maximum to 401 thousand because the IRA is more prone to meet your retirement account goals in that case. This means more investment and risk, so it would be a smart move to open a brokerage account and have your financial advisor or an online broker.
Keep in mind that if you are not saving for retirement, it would be smart to start doing so, but you can try educating yourself on the subject before trading. You can also begin trading small. But check out how to open an IRA first.
2. Get an education
We emphasize this part because misinformation, jumping impulsively into a trade, and not knowing enough can cost you a lot.
Luckily, we live in a digital age where you can find lots of free information and learn a lot if you put your mind to it. There are even courses that provide knowledge about trading and various strategies.
Most stockbrokers will usually offer you their support and financial advisors to lead you through the process while minimizing the risks. You will often start with a “fake” account, where you will trade but without real money – this is a simulation, and it serves educational purposes.
3. Choose the right online broker
As a beginner, you should always put as priority patience, minimizing your risks, and choosing a broker that you trust and feel comfortable talking with. If you don’t know your exact goals, the broker can help you find one, and even put you on the online stock trading software for a while to track how the stock market works. It helps if you have something that will be easy to grasp to advance with confidence.
4. Research which stock you would like to trade
This sounds easy, but it is the hardest part. You should analyze the company that you are interested in how much they earn, their potential, and how they generally influence the market. Your broker should be the one who can also give you this information. You should also follow any news related to the company of your choice, so you can know what’s going on with their business.
Try not to get overwhelmed. Pick only one or two stocks and invest the amount of money you are okay with potentially losing. Don’t add more than that. We are here to stay, not to burn ourselves because of our impatience.
5. Stick to your plan once you set it
The previous advice was made to prepare you for the final one – people who end up losing a severe amount of money are the ones who don’t stick to the plan, and once it starts getting serious, they get into panic mode, so they lose even more. Excitement can also lead you off track, so that is why you should consult with your broker and research if you are a beginner.
Set a goal of how far you are willing to let a stock fall before you get out, plan with your broker, and avoid investing too much at the beginning of your trading journey. This will help you stay on track, get you motivated, and bring you positive results.