Trading stocks, metals, and currencies can be a fantastic way to put your savings to use and generate some extra money from dormant capital savings. However, even though this is a line of work that promises exponential returns on your money, it can be tricky as a newbie to figure out how to invest and which options to invest in.
Every broker will tell you that they are the most reliable person to take care of your investment and that the investment opportunities they are giving you are the most profitable in the market. While some might really be good options it’s always best to do some homework on your own so you aren’t relying entirely on your broker or on hearsay.
1. Brokerage Account
Before you can invest your first dollar into a company you need to set up the infrastructure which will connect you to the stock exchange where you can carry out transactions. This is known as a trading account and it will be set up with the brokerage that you choose to work with. The kind of brokerage you choose will depend on the kind of account you want to set up and that will depend on the kind of trading you want to do. Do you want to trade large volumes worth $100,000+, do you want to do your own research and take investment decisions on your own? Or would you like a trading manager to work with you in building your portfolio? These are only some of the questions you have to deal with before setting up your trading account.
2. Sector
Commodity trading is a field on its own and relates to the trading of things such as oils, minerals, consumable items, and nearly any other commodity you could think of. Whether it’s consumable or an inanimate object, if it’s traded on the stock exchange you can buy it and sell it at a profit. You can select a brokerage on the basis of the sector that they deal in, some brokers only trade forex, some only trade stock, while others can trade whatever you want to work with. Ideally, you should consider trading something you either have experience in or something you don’t mind researching about if you plan on handling the investments on your own. If you are going with an investment manager then you could discuss what would work for you and consider something that offers a high return.
3. Analysis
Determining what to invest in, when to invest, and what to sell to reduce losses is the trickiest part of trading. If you are working with a human investment manager then you do have some support when it comes to taking these heavy decisions. However, if you are working on your own through an online trading platform, it all boils down to how well you can read the market and how updated you are with current trends. If you are doing it on your own, you definitely want to find the best stock scanner and invest in market analysis tools to give you a better idea of what you should do. Free options also give you an analysis but there is a reason a paid solution is not for free. Consider your investment tools an investment as well as they will help you a lot in making investment decisions.
4. Virtual Accounts
One of the most useful digital resources you have available today is virtual accounts. Before you dive into trading stocks on the actual stock exchange with real money, get yourself signed up for a virtual account with artificial money and warm up on it to understand how it all works. This is also known as paper trading and still requires you to research what you are doing and do everything just as you would on a real account, the only difference being that the gains and losses aren’t real. If you can take $1000 and grow it to $5000 on a paper trading account then you should consider investing real money and trying it out.
5. Taxes
In all the glitz and glamour of making money quick by trading, people forget that trading also requires you to file taxes and do the necessary paperwork. Be sure to look into this for your specific type of trading and see how you can file taxes in a way that is beneficial.
Stock trading often gets a bad rep for ruining peoples’ savings and making people homeless overnight, but the stock market is not to blame. It’s poor planning and bad decisions that result in losses and well-researched steps can result in incredible profits. People are in a rush to make money and they take careless steps to get there. Take your time, understand the market and develop a rhythm before you decide to pour your life savings into stock trading.