How to Trade Stocks

How to trade stocks

In this article (from Investopedia) we will focus on how the average person, with extensive or very little trading experience, can enter into the arena of trading and creating wealth.

Trading is often viewed as a high barrier-to-entry field, but this is simply not the case in today’s market. Now, anyone with ambition and patience can trade, and do it for a living, even with little to no money.

Sounds fantastic? It is, and there are so many options available to people with the desire to put in the time to learn.

The New Era of Trading

Changes in technology and increasing volumes on the exchanges have brought about a number of very low barriers-to-entry trading careers. In some cases no personal capital is required, and in other cases a small amount of capital will be required to get you started, in order to verify your commitment to trading. With markets so interlinked, it’s always open trading time somewhere on the globe, and many of those markets can be accessed with relative ease. This means that even people who have full-time jobs or children at home can trade – it is just a matter of finding the right market and opportunity.

How to trade stocks

This is not to say that trading is an easy business – it can be very tough to stay in for the long haul. As we look at some different trading alternatives available in today’s market, you will see that you are able to enter the market, but your ultimate success depends on you. We will look at these options in depth to see what they offer career wise, or if they can simply be used to generate additional income.

The Options Available

People often think that full-time traders with advanced degrees and a high pedigree only work for investment banks. Equally as common is the thought that, in order to trade, you need large amounts of capital and expendable time.

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It is probably true that to get into an investment bank or onto a major institutional trading floor, you will need to have connections or a prominent educational background that sets you apart. Therefore, this alternative will not be focused on. In this article we will focus on how the average person, with extensive or very little trading experience, can enter into the arena of trading and creating wealth.

Trade Independently

The first option, and likely the easiest because it is so flexible and can be molded around a person’s current life, is trading from home. However, day trading stocks from home is also one of the most capital-intensive arenas. This is because the minimum equity requirement for a trader who is designated as a pattern day trader is $25,000, and this amount must be maintained at all times. If the trader’s account falls below this minimum, he or she will not be permitted to day trade until minimum equity level is restored either by depositing cash or securities.

Therefore, potential traders need to be aware of the other markets that require less capital and have lower barriers-to-entry. The foreign exchange (forex) or currency markets offer such an alternative. Accounts can be opened for as little as $100 and, with leverage, a large amount of capital can be controlled with this small amount of money. This market is open 24 hours a day during the week, and thus provides an alternative to those who cannot trade during regular market hours.

Trading is often viewed as a high barrier-to-entry field, but this is simply not the case in today’s market. Now, anyone with ambition and patience can trade, and do it for a living, even with little to no money.

Sounds fantastic? It is, and there are so many options available to people with the desire to put in the time to learn.

The New Era of Trading

Changes in technology and increasing volumes on the exchanges have brought about a number of very low barriers-to-entry trading careers. In some cases no personal capital is required, and in other cases a small amount of capital will be required to get you started, in order to verify your commitment to trading. With markets so interlinked, it’s always open trading time somewhere on the globe, and many of those markets can be accessed with relative ease. This means that even people who have full-time jobs or children at home can trade – it is just a matter of finding the right market and opportunity.

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This is not to say that trading is an easy business – it can be very tough to stay in for the long haul. As we look at some different trading alternatives available in today’s market, you will see that you are able to enter the market, but your ultimate success depends on you. We will look at these options in depth to see what they offer career wise, or if they can simply be used to generate additional income.

The Options Available

People often think that full-time traders with advanced degrees and a high pedigree only work for investment banks. Equally as common is the thought that, in order to trade, you need large amounts of capital and expendable time.

It is probably true that to get into an investment bank or onto a major institutional trading floor, you will need to have connections or a prominent educational background that sets you apart. Therefore, this alternative will not be focused on. In this article we will focus on how the average person, with extensive or very little trading experience, can enter into the arena of trading and creating wealth.

Trade Independently

The first option, and likely the easiest because it is so flexible and can be molded around daily life, is trading from home. However, day trading stocks from home is also one of the most capital-intensive arenas. This is because the minimum equity requirement for a trader who is designated as a pattern day trader is $25,000, and this amount must be maintained at all times. If the trader’s account falls below this minimum, he or she will not be permitted to day trade until minimum equity level is restored either by depositing cash or securities.

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Therefore, potential traders need to be aware of the other markets that require less capital and have lower barriers-to-entry. The foreign exchange (forex) or currency markets offer such an alternative. Accounts can be opened for as little as $100 and, with leverage, a large amount of capital can be controlled with this small amount of money. This market is open 24 hours a day during the week, and thus provides an alternative to those who cannot trade during regular market hours.

The contract for difference (CFD) market has also expanded. A CFD is an electronic agreement between two parties that doesn’t involve ownership of the underlying asset. This allows gains to be captured for a fraction of the cost of owning the asset. As with the forex market, the CFD market provides high leverage, meaning smaller amounts of capital are needed to enter the market. The stock market can also be traded using a CFD. While the stock is never owned, the contract allows profits/losses to be reaped from speculating on the underlying stocks or indexes by mirroring its movement.

High leverage does mean higher risk, but if a trader does not have a large amount of capital, this market can still be entered with very low barriers. Educating oneself on the risks involved and building a strong trading plan are absolute musts before partaking in any trading activity, but when you’re highly leveraged, it becomes even more paramount…

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