Online trading beginners in the stock market, especially those who are not fortunate to have a mentor to guide them. Are always faced with the question of how to even start to trade. The numerous questions in the mind of how to go about trading.
The anxiety of trying to pick the winning stocks. This will only add to the feeling of trepidation for many rookie investors, young or old. We hope that this article will help to guide the beginner in getting a real start into the exciting world of stock trading and investing.
It may seem daunting at first, but buying stocks is quite a straightforward activity. Here are four steps to set the beginner investor on the right path:
1. Select an online stockbroker
The easiest way to buy stocks is through an online stockbroker. After opening and funding the account, the investor can buy stocks through the broker’s app, platform or website in a matter of minutes.
Opening an online brokerage account is probably easier than setting up a bank account. To open an account the investor completes an online account application. Provides proof of identification and residence and some other personal information. After approval, the account is open. The investor funds the account by transferring funds to the broker to credit to the trading account.
There are several important considerations for beginner investors in choosing a broker. An easy-to-use website and trading platform are crucial to success. Next, low costs will ensure that you are maximizing your investment each time you buy shares. Finally, a robust set of trading and research tools will help you find the best stocks to buy.
2. Research the stocks to buy
After funding and setting up a trading account, it is time to dive into the business of picking stocks.
Related: Choose the best stocks for beginners
A good place to start is by researching companies that you know from your experience as a consumer. While conducting research, it is best not to let the deluge of data and real-time market gyrations overwhelm your judgment process.
Keep the objective simple. Which is that the investor is looking for companies of which he or she wants to become a part-owner.
The legendary investor Warren Buffett famously said:
“Buy into a company because you want to own it, not because you want the stock to go up.”
Once you have identified some companies, it is time to do some additional research. Start with the company’s annual report — specifically management’s annual letter to shareholders. The letter will provide a general overview of what is happening with the business and provide context for the numbers in the report.
After that, most of the information and analytical tools needed to evaluate the business are available online. Examples of information to consider are SEC (regulatory) filings, conference call transcripts, quarterly earnings updates, and recent news.
Most online brokers also provide tutorials on how to use analytical tools and even basic seminars on how to pick stocks. Some brokers will go to the extent of providing their clients a full information portal complete with a quality news feed as well as educational webinars conducted by trading experts and analysts. A fine example of such a portal is: www.TradeGATEHub.com
3. Decide on the Number of Shares to Buy
The investor should absolutely not feel any pressure to buy a certain number of shares or fill their entire portfolio with stock all at once. Consider starting small — really small — by purchasing just a single share to get a feel for what it is like to own individual stocks and whether there is an ability to ride through the rough patches with minimal loss of sleep. Positions can always be added on over time as confidence and experience grow.
4. Optimize the stock portfolio
Although investing can be a pleasant experience. The market will of course be turbulent at times. This may mean that the stocks an investor or trader purchased are not performing.
But when things turn difficult, remember that every investor — even Warren Buffett — goes through rough patches. The key to coming out ahead in the long term is to keep the perspective.
The beginner investor should always remember that diversification can mitigate market volatility. But it’ll never truly go away.
Things that we should have control over, are our emotions (sometimes). When trading, for risk management, and management of investment cash. These are important aspects of investment management, which when mastered will probably result in a very successful investing career.
Online Trading Platforms and Their Benefits
Online trading is the buying and selling of financial products on an online trading platform. Apart from shares, other examples of online investment products are:
Currency (forex) pairs, bonds, options, and futures.
Trading platforms are normally provided by brokers for their clients to trade on the market. From any location with internet connectivity. Online trading offers a number of benefits, such as the following:
Online trading is convenient
An online trading account can be opened anywhere in the world. The investor is not bound by time and place as long as there is an internet connection.
Hence, online trading is convenient and accessible from anywhere with no hassle. Investors feel safe trading from home, as opposed to having to go to the broker’s premises.
Online trading is cheaper
The brokerage charges for online trading are much lower compared to the traditional telephone method.
This is because there is no longer the need (to pay) for somebody on the other side of the telephone to take and execute the orders. Therefore, the broker’s overhead costs are much lower, enabling it to charge its customers much less.
At any time, investments can be monitored
Online trading allows investors to buy or sell shares at their convenience. It offers advanced interfaces and the ability for investors to see how their portfolio is performing throughout the day. Calculations on gains or losses are displayed in real-time.
The investor has greater control
Online traders can trade whenever they wish to, as long as the markets are open. On the other hand in traditional trading. An investor is stuck until he or she contacts their broker. Or when the broker is able to place their order. Online trades are instant and confirmed on the spot. Thus eliminating the need to wait for manual confirmation and paper statements.
In conclusion, this is the best time for any beginner to take up online trading. Because technology has enabled the learning process to be much more efficient. Resulting in massive savings in time and money.