Learn how to profit by trading stocks online
It may come as a surprise, but trading stocks is quite an accessible and viable approach towards capital appreciation regardless of your current financial standing. However, instead of buying and selling stocks on an exchange like the NYSE, it’s much easier and beneficial to trade stock CFDs with a brokerage that offers equities or indices among other tradable assets. Trading a stock CFD or contract for difference is essentially trading the stock without actually owning it. You are merely speculating if the price of the stock will go up or down and profit if you are correct in your assessment.
If you are wondering why it’s better to trade stocks this way instead of outright buying some of the best-performing stocks – it’s because CFD’s also provides the opportunity to profit when the price is dropping. You can speculate both ways and realize any profits instantly in your trading account. On the contrary, owning a stock when the price plummets just means that you lose a good chunk of your investment.
Choosing worthwhile stock online
What all traders can agree on; is that in order to make a profit, you need to find a stock that is at least somewhat volatile. Since the best approach is to get in and out of trades between periods of increased price changes, if there isn’t any movement or action in the market, you won’t be able to gain anything at all. For the best bang for your buck and to make your investment worth the risk, it’s best to focus on stocks that are moving fast but are also liquid enough – meaning there is ample trading volume to accommodate for your trades.
High trading volume also translates to better pricing i.e. fees because there are more buyers and sellers interested in the underlying stock and the market is more competitive.
Online stocks analysis
Like all investment vehicles, online stocks are also vulnerable to external factors that may have a significant impact on their daily rates. Therefore, in order to succeed in trading stock online, you need to be able to have a basic understanding of what drives the price of a stock and how to use this knowledge for your benefit.
As you may have noticed, there is a lot of turmoil in the current geopolitical climate and trade wars are a great concern for companies and their respective economies. Where uncertainty and fear are the status quo, the financial markets struggle, and the stock market is among the first to feel the impact of these events.
Furthermore, there are other even more esoteric economic data you need to be aware of – like a company’s financials. If you are looking to trade a stock, the more information about the company you can accumulate the better. Fortunately, the most relevant information is handed to you by the company itself in the form of earnings reports which are released at the end of every financial quarter. These reports are incredibly valuable since they disclose a company’s total revenue among other key metrics to help you decide whether to buy or sell.
If it sounds too complicated though, don’t worry, because for the more visually oriented, technical analysis is another preferred method of stock market analysis. This approach mainly focuses on predicting future price direction by applying indicators that identify patterns based on historical data.
Deciding on a strategy
Regardless of your approach to trading stocks, you need to have a predetermined plan of action. Your plan should consist of a simple set of rules regarding your entry points, position sizing and the steps you are taking to minimize your risk exposure and potential losses.
For example, some traders rely on scalping for their daily gains where they close a trade as soon as it accrues a modest amount of profit and moves on to the next one. Executing multiple trades per day this way can accumulate a healthy amount of gains but is also quite risky.
On the other hand, you have the long-term traders who mainly focus on holding positions for longer periods of time in order to catch big moves. Also, there are those who only trade when a trend has formed on the chart and just ride along with the trend until it reverses.
There are multiple ways to profit from the stock market and there is always another opportunity down the road, meaning you just need to be patient and play it safe – especially in the beginning.
With the recent advances in the fintech industry, trading stocks has become even more accessible to the public and multiple user-friendly platforms are available to help get you started on your journey towards financial success.
As long as you know what to look for in stock and you have the patience to educate yourself, you can harness the stock market and take advantage of the incredible opportunities it provides.