Many would-be stock traders have visions of slick, fast talking men in suits and ties when they think of trading on the stock market. And for a long time, it really was only these "suits," in this case stock brokers and traders, who had the ability to execute stock trades. However, times have changed and anyone, male or female, in jeans or pajamas, can trade on the stock market. All you need is a dollar (a few would be better), a dream and a trading account.
Get a trading account. There are two approaches to trading stocks. One is to hire a full service stock broker who will walk you through the process, give you lots of advice, and execute transactions on your behalf. The other option is to register with an online, discount trader where you make all trades yourself for a low transaction fee, typically around $10 a trade.
Learn the basics. When you buy a stock, you buy a piece of ownership of the company. After a company issues stocks, investors trade them on an open market where prices rise and fall based on supply and demand. For example, if the market price of company x is $10 and investors think this will increase, more people will buy and this will push the price up. When you sell your stocks, the difference between the total original cost and the total sell price is your return on investment.
Brush up on your current events. No, not the high school type, but the business, as in Wall Street Journal type. In order to make appropriate stock trades, you need to be aware of what is happening in the business world. Prices increase and decrease based on events in the companies and the markets, so you'll need to keep tabs on your stocks. Publications such as the aforementioned Wall Street Journal and websites such as Bloomberg provide up-to-date information on business events.
Develop a strategy. Are you looking for long-term gain aimed at retirement? Are you looking for short-term, high-growth investments to supplement your income? You'll need to have goals and objectives in order to play the market smartly. Here is where you may want to consult with a financial planner, but you can do this yourself if you are informed. The Motley Fool recommends to buy shares of stock in solid, established companies and hold onto them for the long-term to see the greatest profits.
Determine how much you can invest. In general, you should never invest more than you are willing to lose. Beyond that, MSN Money explains that even if you invest as little as $100 to start, you will see gains over time. Of course the more you put in, the higher your potential returns will be.
Items you will need
- Trading account
- Try a simulated stock market game to test your skills before you put in real money.
- Consider mutual funds, where you don't need to pick stocks yourself.
- Don't get started before you feel you know the system well.
- Don't buy hyped up stocks until you are very experienced.
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