Many of us have seen the big money players and wondered how to make money with online stock trading, haven’t we?
The big players in the game also started somewhere, so why can’t you? We have some tips and best practices for beginners that you can follow to make real money through online stock trading.
But before we start, here are some things to note. You may see big investors make it to the headlines every now and then but it is important to understand that they didn’t reach that level of success overnight. The online stock trading world is a rocky path with many big or small gains and major risks. You don’t always win, there’s an equal chance of losing as well.
However, if you know the rules of the game, you can play it safe. In other words, there are many strategies and tips that you can use to ensure that you take minimum risks. Once you are on the right track and know what you are doing, it is a great way to make money fast, especially given the economic climate in today’s world where you don’t find good returns on paper notes or saving accounts.
So here are our tips on how to make money with online stock trading.
1. Research, Register, and Practice
Research is the key to making the most of the online stock trading possibilities. Even the big players of the stock trading game keep an eye on current trends in order to decide their next move accordingly. Before starting, the first and foremost task is to research and get hands-on knowledge about all the current trends, key players, and stakeholders in online stock trading. Your research should include newspapers, economic journals, stock-trading magazines, blogs of successful traders, and other online news.
When you think you are ready to enter the game, look for the top-rated websites and register yourself. However, keep in mind that it is important to read reviews and research various websites before registering yourself on a website. Other things to consider while making an account are the transaction fees, tools, its mobile application, and customer support policies.
Practice your trading skills before putting your money in the game. Practice will make you familiar with the website, the rules of trading, and the tools. You will also learn how trades are placed and how to evaluate the stock.
The best part about being a new trader is that there are endless possibilities for you. You can research the market from a general point of view, which will make you learn about all aspects of the market. Once you get the hang of it, you can narrow your research and focus on a certain area. You can also register yourself on multiple websites and then choose the one that you like the best.
2. Picking and Buying the Right Stocks
The next step is to get your hands on the right stocks – this is easier said than done. You should know that you can’t always end up picking the right stocks. The best you can do is following the best practices to be able to maximize your chances of buying the right stocks.
There are three basic questions that you should ask yourself before picking the company you want to invest in.
- Is the company currently profitable?
- Does it have the potential to be profitable in the future?
- How does the company cope with the losses, if any?
While these basic questions may seem complex, you know need to go through a lot of trouble to answer them. Instead, simply follow these tips to find the answers that will lead you success.
- Review the financial reports of the company and evaluate their performance and patterns. The annual reports of publicly trading companies are generally available online.
- If profitability is not seen as a pattern, it doesn’t mean that you can’t invest in the company at all. It may still be worth it if they have some new ventures, good leadership, ideas or looking for a merger.
- Compare the stock trading of the company to other companies to review their strengths and weaknesses. You can do a cost-benefit analysis for the companies that you pick and review their consistency.
- Go through the worst quarter that the company has been through. Evaluate and review how they coped with the losses and what strategies did they use.
- Find out how the company is different in operating its business and managing stocks than the others in the market.
You can add a lot to your checklist once you are stable in the game. There is an ample amount of data available that can be used for financial analysis. Once you feel you are ready with your pick, the next step is to buy your first stocks.
Buying your first stocks can be exciting and tempting. You can start by investing as little as $1,000. You can play in thousands and millions once you are in the game. But how will that happen? Find out how you can perfect your trading skills once you’re in it.
3. Grooming Your Trading Skills and Marking a Position
If you are a newbie and don’t really know how to make money with online stock trading, it is advisable that you take up stock trading as a part-time earning opportunity. However, it will still require your full-time attention. You can’t be an expert overnight and you are not expected to be. But the good news is that it is possible to improve your trading skills and you can do that in the following ways.
· Strategies and Analyses
As a trader, you need to up your game when it comes to strategies and analyses methods. If you know your strategies, you will always be ready for your next move. Keeping an eye on the market trends and analysis will also help you boost your profits.
· Invest in Penny Stocks
As a newcomer, you should go for penny stocks, which are low-value stocks. They are generally available for $5 per share or less. You get fewer returns on these but it is feasible for a beginner. You can start by investing in penny stocks and once you gain enough from these stocks, you can invest in mid-cap or large-cap companies that have big returns. The reason why this is advisable is that Penny stocks have lower risks attached to them.
· Be Flexible
You can do day trading, hold onto stocks for a long time, or use other flexible ways to trade your stocks. It is up to you how you want to strategize your trading. The online trading market allows you to be flexible.
· Dividend Stocks and IPOs
Keep an eye on high-yield dividend stocks as you will get dividends from the company. Dividends are a percentage of the profits that the company makes in each quarter. Even if your stock value does not increase, you will get a dividend from the company. Initial Public Offerings (IPOs) are the first stocks that a startup company offers. This opportunity is a gamble as you can’t say if the company will be successful or not but these stocks are low-priced. The risk is lower but it can change into something great.
· Monitor Market Trends
If you want to stay in the game and become better, you cannot afford to take your eye off the market. Stock markets are dynamic and the trends can change significantly within minutes and seconds.
4. Buy Low, Sell High
This should be the rule of thumb. If you are a trader and wish to make profits on your online trades, the easiest method is to buy low and sell high. Stock prices are rising and falling all the time so don’t worry about that too much. The number of stocks that have fallen may rebound the next day. So trust your research, take decisions wisely and do not base them on your impulses.
You have already read through how to buy the right stocks, now learn how to sell them at the right time. For this, you will have to evaluate the company’s earnings per share, profitability, purchase activity, or stocks’ patterns. If you want more profits, you can wait for the stock prices to go higher instead of selling them earlier. Patience is key when dealing in the stock market.
Your strategies and research on current market trends will help you to know the best time to sell. The goal is to buy low and sell high.
5. Diversify Your Options
Once you feel you have a hold on your holdings and have established a good position, it may be time to diversify your stock portfolio. Diversified holdings give you a chance to earn consistent gains and reduce the risks since you will not be dependent on just one industry.
You can diversify your options in industries such as tech, manufacturing, retail, and others so that the negative industry trends in one trade do not affect you too much. In other words, don’t put all your eggs in one basket.
Diversifying protects you from industry fluctuations but at the same time, it requires a significant amount of work. You will have to spend a considerable amount of time on research and analysis so make sure you are ready for it. If you want to go for high-risk investment, a diversified portfolio will give you an advantage as you will have a backup to rely on.
Whether you want to stay in the stock trading for long term or just part-time, reinvesting will help you earn more profits. Reinvesting the profit is a wise action to take in order to achieve long-term success. If you are making low amounts of profit in the beginning, reinvesting them means lower risk and greater chance to turn your investments into bigger profits. You can also keep some amount in your savings account or retirement fund to secure it.
However, it’s also important to know when and where to stop. Online trading can become an obsession and since it is a gamble, it can lead you to a substantial financial loss. It sure seems tempting in the beginning but once you are deep into it, you lose your ability to make rational choices and enjoy taking big risks. This could be harmful.
7. Inspire and Be Inspired
When you think you are making enough money, connect with a certified accountant and learn about your stock holdings and the taxes applicable to them. Keep a professional in the loop.
You can connect with expert traders to learn from them and get ideas on how to boost your stock profile. Learn from their practice and calculations and make better decisions. Many experts also offer mentorship that is something good to invest in. You may also pay for an online trading course to enhance your knowledge about stock trades.
Join forums for market experts and talk to peers. You will be surprised by how much you didn’t know! Remember, with so many flexible options, techniques, and approaches, money trading is limitless. Once you feel you can afford it, you should take bigger risks and apply new strategies.
Get started today with these basic tips. Good Luck!