Trading stocks like a pro doesn’t have to be complicated or time-consuming. In fact, with proper guidance, you can trade shares of stock in just the time it takes to gargle a glass of water and knock out an email. Below is how to trade stocks like a pro.
Set Aside Funds
You’ll need to set aside some money to buy a trading computer if you want to start trading. You may want to get a portion of your portfolio in cash or other securities, then set aside the rest as trading capital. This trading capital can include regular money in various forms (bank deposits or money market funds), stocks (either purchased or held outright), bonds, mutual funds, commercial paper/money market instruments, U.S.
Set Aside Time
You’ll need to set aside time, at least a few hours a week, to trade stocks. Since you’re doing this as a hobby, it’s not unreasonable to think that you might want to devote most of your free time to trading. So it’s important to set aside two or three evenings a week for trading stocks online. If your evenings are already filled up with other activities, you can do much of the research and analysis during the day or at night, with the actual placing of trades done in the evening.
Start Small
First, decide what kind of stock you want to trade. You have various tools, which means you can access stocks on the over-the-counter markets and the OTC Bulletin Board. You can look at various mutual funds, which have large enough pools of capital to trade in. You could get together with your buddies and look at various stocks they might own; you could even go to a company’s website or look up its annual report.
Avoid Penny Stocks
There are stocks out there that will appeal to you because they’re very low in price. These stocks are called penny stocks, and the word “penny” is the slang term for one small dollar. However, because of their small price, you should be highly skeptical of the value they may have. Don’t risk your hard-earned money on these kinds of stocks. If you decide that you want to buy or sell a stock, do so through a specialized brokerage firm. Several good companies out there have created websites specifically for trading stocks like a pro. You can set up an account with one of these firms and give the broker authorization to buy and sell stocks on your behalf.
Cut Losses With Limit Orders
You’ll want to use limit orders most of the time. If you’re unfamiliar with these types of orders, they allow you to set an order for how low or high you’re willing to buy or sell a stock. When you place a limit order, you’re willing to spend X dollars for this stock and nothing lower or higher. You’re willing to sell it for no less than Y dollars, but you won’t sell it for any higher than that.” By using limit orders, you’re protecting your account from getting wiped out by a massive price swing that would move the stock greatly before you have time to act. Limit orders are called “good-til-canceled” (GTC) orders; they stay in place until they either execute or they’re canceled by you.
Be Realistic About Profits and Losses
Remember that you’re trading stocks like a pro. So be realistic about profits and losses. Know that you’ll probably lose more money than you win, especially at first. So if you’re not willing to accept the fact that it will take your trading a little while to show a profit, then don’t get started with stock trading in the first place. Monitor the stock investments routinely. That means at least checking it once a week. Ensure that you do a little analysis on your stock of choice. Some traders will say that they don’t use technical analysis, but others who are more sophisticated will look at technical indicators and other financial statistics associated with the stock to see if there’s a pattern that might signal an impending rise or fall in the price of the stock.
Conclusively, trading stocks is a hobby for some and a business for others. If you’re interested in doing it as a business, you may want to consider studying the stock market and investing seriously.
