*OspreyFX would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.
Stock Trading: A Beginners Guide
Traders Takeaways
- What is stock trading?
- How the stock market works
- Tips for starting and surviving
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What is stock trading?
We often hear the term being discussed in business circles or in the news: Stock trading. What does it actually mean? Simply put, stock trading refers to the buying and selling of shares in a particular company. It is a form of investing that prioritizes short-term profits over long-term goals and gains.
Therefore, being a stock trader involves a high level of risk and the responsibility of acquiring proper knowledge before diving in. Keep in mind though, that not everyone who buys and sells stocks is a stock trader. There is a slight nuance between a trader and an investor. And this difference is based on the frequency of trades and the goals set.
Too often the typical trader is depicted as a frenzied Wall Street buff sitting in front of monitors, watching the stocks and buying or selling all day – every day. Whereas investors are mostly seen as those who place long-term goals and have the patience to wait out their strategy.
Rarely though is stock trading limited to what we see at the Stock Exchange. More common is starting to trade from the comfort of home. Albeit, having had enough training and know-how to do so in a proper way.
Two main types of stock trading:
Clearly, between the trader and the investor, two different trading strategies emerge. And these can be defined as follows.
The stock-trader
Stock traders will capitalize on price fluctuations to determine where they buy or sell shares.
The investor
Cold-blooded and clear-minded, the investor will buy stock in a blue-chip company to hold for years or even decades.
How to trade stocks
There are methods and strategies to learn and master in order to trade stocks successfully. And this means, reaching your goals. So if you are planning your investments and making decisions yourself, the most important step is to get familiar with the process. Learn how stock prices are set, how to read stock quotes, bid, and ask prices. Moreover, use trailing strops to protect your profits and limit the losses. You’ll also need to learn how to avoid mistakes like buying high and selling low or getting caught up in an investment scam.
The two basic methods of trading are on the exchange floor or electronically. The trend has definitely been moving towards digitization and leaving the trading floors. While most markets and stocks can now be traded online, there is some resistance to the matter still. There is a certain romanticism to the stock exchange floor.
Tips to start, and survive
If this is your very first venture in the world of stock trading, let this list be your guide to kick things off and actually survive. A good approach is often to keep things simple and invest in a diversified low-cost share to reach long-term performance. We narrowed down the process to the following steps.
1. Open a Brokerage Account
First things first, stock trading requires a brokerage account. That is a specific type of account designed to keep investments. It is rather easy to find an online broker and open an account. Sign up with OspreyFX and trade or invest in the Stock Market today.
2. Read On
Books, articles, anything that comes your way. Particularly interesting are blogs from experienced brokers and traders which can give you an insight into the tips and tricks of the trade – pun not intended. Basically, educate yourself on the topic.
3. Find a Mentor
Look for an experienced trader or investor to learn from. The mentor will have a fundamental understanding of the stock market and is someone who can guide you in your journey to become the trader you aspire to be. He or she will teach you the ins and outs of navigating rough market waters.
4. Look at Case Studies
Great investors who made it big are a good way to get perspective and inspiration. As well as cultivate a certain appreciation to individual goals and techniques used to reach them. So, once more, read. Read case studies and watch documentaries on the subject.
5. Follow the Stock Market
Go on news sites, subscribe to receive notifications and updates to stay in the know. Include it in your daily routine to check the stock market and read the headlines. Stay exposed to economic trends, events, analysis, and even the language.