If you’re looking for an easy way to make money, you’ve probably considered trying your luck at online trading. After all, the stock market has risen in popularity over the years, and more and more people are opting to learn how to invest their money in the hopes of making a quick and easy profit.
Although there are legitimate online stock brokers out there, you should definitely do your research before signing up with any of them. One of the major downsides of trading stocks online is that you’re leaving the security of the office and being linked to the financial markets 24/7. Anything could happen, but you have to be willing to take the risk.
That’s why we’ve collected 8 useful tips that will help you make the right choice and ensure you make the most of your online stock trading experience. Continue reading for more information.
Find A Good Brokerage
Before you begin investing in stocks, you’ll need to decide which brokerage to use. Ultimately, your financial advisor or broker will guide you through an appropriate recommendation. Even though there are online brokers that don’t require you to retain a financial advisor, it’s still a good idea to work with a financial advisor if you don’t have one yet. By reviewing multiple brokerages, you’ll be able to find one that suits your needs. Otherwise, you might end up somewhere that isn’t suitable for your personal situation. To save you time and money, utilize online tools that compare brokers and allow you to find the best deal based on your personal situation. For example, if you want to invest in stocks for short-term gains, you might want to consider a CFD (contract-for-difference) brokerage. As the name implies, CFD’s allow you to “short” stocks, which you’ll need in order to profit from a rise in values. If you’re looking for a long-term investment that won’t fluctuate too much in value, you might want to consider a simple-buy-sell stock brokerage.
Set Up A Bank Account
In order to buy and sell securities, you’ll need a place to deposit your money. The most convenient and popular way to do this is through a bank account. If you do a lot of online trading, then a direct-deposit brokerage account is probably the best choice for you. These types of accounts allow you to make quick deposits and withdrawals, and the routing numbers are generally quite easy to remember. If you’re newer to online trading, then consider opening up a business checking account that’s linked to a savings account. This will ensure you have a place to store your money in case of an emergency.
Only Trade What You Can Afford To Lose
A good financial advisor will help you determine how much you can afford to lose on each trade. This is particularly important if you’re using margin trading or short-selling. In these instances, you’re essentially betting that the value of a stock or index will decline. If you lose money on a trade, you’ll need to find additional funds to cover your losses. Otherwise, you’ll be forced to remain 100% margin or short the stock/index until you get your money back. The key to successful trading is keeping your losses as minimal as possible and enjoying the occasional small win. Never, ever play with money you can’t afford to lose, and try to steer clear of all gaming and betting activities. They’re fun and exciting, especially when you’re winning, but the potential harms associated with these activities far outweigh the benefits. It’s best to keep your hands off of the keyboard and your eyes off of the screen if you want to avoid trouble. Save those actions for when you’re actually playing – for fun and leisure only.
Don’t Rush To Re-Estimate
While it’s important to look at up-to-date information about the markets, you shouldn’t let this influence your decision-making process. After all, the markets are all about supply and demand, and current information is always useful for placing orders or seeing what’s available in real-time. However, it’s often better to wait till everything is settled before re-estimating your portfolio. This will help minimize any unexpected movements and keep things as stable as possible.
Use Limit Orders And Stop-Loss Orders
Orders are the foundation of every successful trader’s strategy. Whether you’re buying or selling, place an order in the proper place at the proper time. This will give you the best chance of being executed at the price you want. Placing orders limits your exposure to sudden price changes and gives you the flexibility to take advantage of any sudden moves in the markets. There are several different types of orders, and understanding the differences can help you become a better trader. Two of the most useful orders are limit orders and stop-loss orders. Limit orders place an order to buy or sell a specified amount of a stock or index at a specific price. A stop-loss order is similar, except it places a limit on how much you’re willing to lose before canceling the order. These orders are useful for taking a peek at the current market conditions or watching for a specific stock to trend upward or downward. If you get stopped out on a trade because the market price moved outside your chosen limits, then you’ll need to determine whether to buy or sell in order to get back in. You can never tell what will cause a stop-loss order to be triggered, but at least you know that if it is, then there’s no going back. It’s better to be safe than sorry when using these types of orders.
Don’t Forget The Basics
The most basic rule of all is to never, ever risk more than you’re willing to lose. This should be a constant reminder to you whenever you get into the markets. There are many potential gains lurking just around the corner, but you’ll never know what’s around the next bend if you don’t put yourself in situations that lead you there. A good starting point is to familiarize yourself with the overall market condition and see how much money you have to work with. Then, you can determine how much risk you’re willing to take on each trade based on that. For instance, if you’re using margin trading or short-selling, then you’ll want to limit your risk exposure as much as possible while still taking advantage of potential profit opportunities. These are all important things to consider if you want to be a successful online trader. Keeping things simple, educating yourself, and sticking to your guns will get you a long way toward attaining those goals.