Are you eager to jump into the world of stock trading … but don’t know where to start?
Maybe you’re an experienced trader in need of a different strategy. Or maybe your current strategy needs improvement.
No matter your level of market knowledge, this post can help you learn more about trading stocks and give you some useful pointers … Let’s get to it!
What Is Stock Trading?
First, let’s be clear on exactly what stock trading is.
Stock trading is the act of buying and selling stocks. There’s the standard ‘buy low, sell high’ strategy.
FOR EXAMPLE: So say you buy $1,000 worth of stock XYZ at $10 per share. You hold the position and watch as the stock price rises to $12 over the next two days.
You sell the shares for at a profit of $2 per share, or $200 in total (before fees and commissions). Sounds easy, right?
Here’s the problem: It’s not always that straightforward. There’s always the possibility of losing or break-even trades. You need to know what you’re doing when you buy and sell stocks.
Read on to learn some more advanced tactics for making trades…
How to Get Started Stock Trading
With the wonders of the modern internet age, it can be easy to start your trading journey.
Here’s a list of the minimum requirements you’ll need to dive into active stock trading:
- A brokerage account. A brokerage account gives you access to the stock exchange — that’s where you can place orders to buy and sell stocks. Opening an account can be a quick and simple process. Check out this article for more on how to pick the right broker for your needs.
- Trading capital. Wanna purchase a stock? First, you’ll first need to fund your trading account. We call this ‘trading capital.’ You can start out with as little as $500, depending on which broker you pick.
- A trading strategy. You certainly can randomly buy and sell stocks, hoping for the best. But that’s effectively gambling. The smart way to trade is to have a set strategy that you practice and feel comfortable with. This involves study and research. Be sure to learn about trading strategies if you’re just getting started or if your current strategy isn’t working.
- A trading platform. The right trading platform can be your trading command center. It’s where you can check charts and news feeds, build and track watchlists, place order entries, and more. At StocksToTrade, we’re in the trading-platform business. Our platform is designed to be top of the line for traders of U.S. stocks. Check it out for yourself! Grab a 14-day trial for just $7 to see why so many trading pros use StocksToTrade.
Stock Trading as a Profession or Career
There are people who do well in the markets — they even make a career out of trading. But don’t think it’s easy. You have to be dedicated to learning, to research, and following your thoughtful trading plan…
So yeah, it’s possible to make a living as a stock trader. Some traders can make their entire income from the markets.
And a career in trading can come with some benefits. You can be your own boss, work from home or as you travel, and maybe set your income. But with every upside, there’s a downside too, right? The reality is that trading can be tough, stressful, lonely, and expensive due to losses.
You don’t have to do it alone. And you don’t have to learn it all on your own. Ready to build your trading skillset with peers? Crave a mentor who can help you see how the pros take on the market each day? Join StocksToTrade Pro.
STT Pro is our premium trader education service. You’ll have the opportunity to learn and interact with me through webinars. And you can connect with other traders in our friendly community and chatroom. Come join us if you’re ready to learn!
Types of Stock Trading
Trading stocks isn’t a one-size-fits-all venture. There are a lot of ways to be involved in the stock market. First things first: you need to learn which trading style suits you and your lifestyle.
Here’s a brief rundown of the major trading styles available to you as a retail trader.
Day trading
Day trading is where you open and close a trade within a single trading day.
So you may buy a stock in the morning. Then the stock price rises, and you sell your shares just before the market closes.
With day trading, you can have the opportunity to make lots of trades, and there can earning potential with several trades. But there’s also risk …
You have to be focused on the market during the day, and that may be difficult if you have a full-time job. You also won’t be able to profit from big multi-week or longer moves in a stock. Those are some key considerations to remember when considering day trading.
Scalp Trading
Scalp trading is like day trading’s cousin. When scalping, you open and close a stock position very quickly, from seconds to minutes.
For example, you might buy stock XYZ at $10, then sell your shares 10 minutes later for $10.30. You can catch a very small but fast move in the stock price.
Scalping requires super quick reflexes, an affordable broker, and the ability to read the market without lag or delay. You’ll also need level 2 quotes and a top-end trading platform.
Scalping as a strategy can be stressful. And if you make bad trades, losses can add up quickly, especially if you make several trades per day. Be cautious if scalping is on your trading strategy radar.
Swing Trading
So we’ve looked at some of the more stressful and demanding strategies … let’s take it down a notch.
Swing trading is the act of holding onto a stock for anywhere from a day to a month or longer, trying to catch the swing in a stock price.
FOR EXAMPLE: Let’s say you purchase XYZ stock at $10 because you see a great bullish news story and an exciting chart pattern. You hold the stock for a week, and you see the market push the share prices up to $14. If your timing’s right, you can sell your shares and lock in profits, completing a successful swing trade.
Swing trading can mean less intensive screen time compared to day trading or scalping. That is, you don’t need to stare at charts as much throughout every trading day. Instead, you can set your entry orders and stop losses and go about your life. This strategy may be a strong contender if you hold a full-time job.
Position Trading
Position traders hold a stock position for weeks to months, maybe longer, waiting for major stock price moves.
In this EXAMPLE, you might purchase stock in XYZ for $10. Six months later — under ideal conditions — the price is up. You sell the shares for $30, tripling your capital. Sounds pretty great, right?
Here’s the thing: Position trading requires you to think and act like a sniper. You have to be able to pick stocks primed to make a price move. That means you have to study and refine your trading strategy.
Some people think trading like a sniper is full of action. It’s really not. It’s watching, studying, researching, and waiting for opportunities, then pouncing at the right moment. If you love action and want to be involved in the market every day, you may find position trading slow and even boring. Food for thought…
How to Survive as a Stock Trader
Maybe by this point, you have some idea as to the trading style that most interests you.
So now, let’s run through a few pointers on how to survive in the markets — no matter how you trade:
Practice, Practice, Practice!
If you want longevity in your trading career, you need to continuously work to develop your skills and adapt to the market.
Seriously, your education in the markets and trading never ends. You need to constantly research and refine your trading strategy. You have to stay up to date with different setups and what’s working in your trade (and what isn’t). It’s also smart to test new strategies or theories with paper trading.
And you want to keep track of it all with a trading journal.
There’s no short-cut in this learning process, but you can potentially speed up your learning curve. It’s just smart to interact with seasoned, transparent traders to see exactly what they do each day. Joining a community that’s focused on trader education, like StocksToTrade Pro. You’ll have access to daily webinars, chats, and market updates from experienced traders.
Establish Your Risk Tolerance
Even the best traders in the world lose trades all the time. So how do they stay in the game? By managing their risk. They work to minimize losing trades as much as possible, and they make sure no single trade can knock them out of the game.
Managing your risk means knowing how much to risk on each trade. For example, it may be just 1% or 2% of your total trading capital. You also have to know where to place your stop loss. If a trade isn’t going as planned, you exit that losing trade before it goes bust.
Know When and Where to Buy Stocks
Many newbie traders hear about a ‘hot’ stock that’s about to rocket up, and this where they can make a huge mistake: They instantly enter the trade. Sorry, that’s just not smart.
You have to do your research on every single trade.
It’s better to take a broad view of the stock. Watch the price action on the chart. The chart can give you an indication as to the stock’s historical moves and the levels that excite the market.
This is just one step toward making intelligent trades and possibly stopping you from entering a dud stock. Keep your eye on the charts!
Take Advantage of StocksToTrade Features
No matter what trading style you’re into, there are so many steps involved in finding and executing trades.
You need to scan the market for opportunities, keep up with the latest news, watch the charts, follow a variety of stocks and sectors, plan your entry and exit points … It’s not easy.
That’s why we fully recommend you check out the powerful features we built into StocksToTrade.
StocksToTrade is THE trading and research platform, created BY traders FOR traders. It’s the product of countless hours and the dedication of our team (including me). We worked to develop the exact tool we wanted to help make our trading day more streamlined.
Not on board yet? Get your 14-day trial for just $7. See why so many top stock traders won’t start their trading day without StocksToTrade.
Conclusion
Whew! That’s an overview of trading. I hope by now you have a better idea of the different paths you can take in stock trading … and how to be smarter in any kind of trading style.
Don’t feel like you need to rush into anything. It’s important to take things step by step. Get the few things you need first: open a broker account, set up your trading platform, and work out a strategy that works for you. And remember to practice!
After that, it’s all about making trades, learning, and developing. Every trader goes through this. We all started out as losing traders who had no idea what we were doing. Don’t be scared! There’s plenty of help if you just look in the right places.
Before you take advice from anyone, vet them thoroughly. Look for full transparency: wins, losses, philosophy, and more. You want to be a self-sufficient trader, so learn to think for yourself.
Want some help in the learning process? The door to StocksToTrade Pro is always open. It’s a friendly and open trading community where we share our trading journeys through live chat. You’ll also have access to webinars where I keep you abreast of what I’m doing in the markets and share my cutting-edge educational material. I invite you to join!
