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How to Start Trading Stocks: 3 Important Tips

Do you want to invest in stocks for the long term? Or do you maybe want to start trading stocks actively? Whatever the case is, there are several things you need to know before you start. It’s very important to understand what to expect and learn which tools can actually help you improve your chances of success. 

This article will help you get well-informed and share some important tips you need to know when you are beginning to trade stocks. Without further ado, let’s begin.

Learn About The Best Stock Research Tools

When you start trading stocks it’s important to find the time to do proper research. Using various tools and subscription services can really help you determine which funds you want to trade, and it gives you many advantages. Experts suggest starting with tools suitable for beginner traders. Platforms such as Power E*TRADE or tools like the Mindful Trader are recommended by many experienced traders, but there are numerous other types of stock research tools out there. When you choose the best one for your needs, it’s crucial to find the one that will mostly depend on your personal preferences and your trading strategies. Make sure it’s customizable, easy to use, and that it provides real-time data.

Consider Your Finances

Day trading is very interesting and exciting for many investors. However, if you are a complete beginner it may be almost impossible to maintain a proper balance on your account. Some studies have shown that daily traders in the U.S. usually need to have $25,000 before investing. That is quite a large amount of money that many people who are just getting started don’t own.

If you have at least $10,000 to commit to the endeavor, you might consider swing trading. You can start with less for sure, but this amount of money will give you more opportunities to trade stocks at different prices. It doesn’t have a minimum capital requirement, but it will help you keep your account in balance. Broker charges for trading, various fees, and commissions can get quite expensive.

If you have much less capital, why don’t you consider investing? Commissions won’t be such an important factor, and you could do it for a longer time period. As soon as you can afford 100 shares make sure you buy the stocks you are interested in. Many brokers will allow you the possibility to buy fractional shares as well. This is great news since you can begin with even less capital.

A good piece of advice on how to save your money on commissions is to make only one trade instead of multiple ones. For example, instead of buying 20 shares every day consider saving money and buying one large share once a month.

Manage Your Day Trading Risk

Before you start trading stocks you really have to know how to control your risk. Most traders should control it in two ways:

Trade Risk

If you aren’t familiar with the trade risk, don’t worry. It’s quite simple. Basically, it shows how much you are willing to risk on each trade. Studies have proven that the ideal risk is around 1% of your capital. This means you need to pick an entry point and set a stop loss to get you out of the trade if you think it’s going against your goals. 

Daily Risk

A single trade shouldn’t damage your whole account and cause loads of damage. A daily loss limit is essential, the same as the 1% rule. Of course, you can always change it a bit. For example, you can set it at 3% or more of your capital on some occasions. Still, be careful. The stock market can be tricky, and you don’t want to risk too much. Once you hit your daily limit, you should stop trading that day.

However, if you are constantly profitable you may set your limit to be equal to your average day. For example, if you often make $200 on your best days you can sometimes allow losing $200 on your bad days. By using this logic you can get back on track easily and prevent losing a lot of money in a single day.

Trading stocks can be a very exciting experience, but you still need to know the basics. Being patient, determined, and disciplined is your way to success. Make sure you incorporate these easy tips into your business. Educate yourself constantly and plan your best strategies to stay on a road to prosperity. Having a game plan is crucial to master the stock market.

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