What is stock trading?
Stock trading is the buying and selling of stock. You buy and sell stock because you want to make a profit on fluctuating stock prices. Stock is traded over a stock exchange. Some stock exchanges have a trading floor while others have gone electronic and have no trading floor at all. To buy stock from the exchange, you need a stockbroker. Most stockbrokers charge you for each trade you make.
Online Stock Trading
Online stock trading is nothing but investing online. To trade online, you have to open an online account with an online broker. The broker deals stock online by offering a trading platform that uses proprietary software. Deciding on the best online broker becomes easier if you do the following:
- Determine if the brokerage charges suit your trading frequency
- If you are going to trade infrequently, check to see if there are maintenance charges
- Use demo accounts offered by brokers to understand how the real thing works
- Ensure that the broker is strong in analysis and research areas
Five Ways to Get the Best Deals on Stock Trading
Choose your investment style out of the following:
You may want to hold the stock for at least a year. You won't have to invest much time because short-term stock price volatility will not affect you.
You may want to sell stocks the same day that you buy them which is called day trading. This strategy uses up most of your time.
Another option is to hold stock for limited periods like only a few weeks. You need to depend upon a mix of technical and fundamental analysis to make trading decisions when holding stocks for a limited period.
Important things to consider when stock trading include:
- Be ready for some losses. You will bounce back provided you stick with one chosen investment style. You should know how much money you could afford to lose. Trade stocks only with the money you can afford to lose.
- Target a realistic return: A return of 10% is a good target.
- Invest in secure stock for a longer period. Do not buy stock for a price that is not justified by its fundamentals. Avoid panicking if the market becomes unstable and stock prices fall. Hold on to the stock likely to bounce back and sell the rest.
- Buy when prices are low and sell only when the prices become attractive.
- Avoid overleveraging when the market turns bullish. Never invest beyond what you can afford to go without.
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