So you want to get into stock trading? You want to feel the thrill and exhilaration of trading big money with the hope of even bigger rewards? Well, it is no walk in the park, I can tell you that for a start. Many people have tried to enter into stock trading with a boatload of confidence, only to be chewed up and spat out after a couple of bad deals and a lot of money spent and wasted.
The City is paved with the lost hopes and aspirations of thousands of would-be traders that thought they could do it all.
So before you go any further, just know that it is one of the hardest things you’ll ever get yourself into. But with a lot of struggle comes a lot of rewards too! You can earn a lot of money if you play the markets just right. If you have a spark of determination and a head on your shoulders, you could climb up the ranks to become a big trader. But how does one start to get involved? How do you begin a controlled and safeguarded mission to the top of The City?
Well, we are going to give you a few tips on how to get started in stock trading. Don’t forget us when you’re flying high in the markets
Find a broker
The first thing you have to do is find a reputable stockbroker in order to get started. If you have already done this then move onto the next stage, but if you haven’t yet you’ll need to find a broker that really has needs at heart. Lucky for you there are many online brokers out there that offer fantastic rates and offers for those that are just beginning to stretch their legs in the stock market.
Although there are a lot of deals out there, you really need to have an eagle eye when it comes to picking the right broker. If you don’t pick the right one, you and your broker’s pathways could diverge into completely different areas. You want to stick with someone that’s going to know what you need to do to get you to where you want to be in the future. This is the first and one of the most important stages of starting in stockbroking.
Learn the lingo
Even though you are not too hands-on with the markets because your broker sorts most things out for you, you need to understand the language of stockbroking to a certain extent. You want to know that you have control over the effort and money your putting into the financial endeavor. Here are a few easy ones to get you started:
Market is the simplest command you can give to your stockbroker. It basically means you will buy stocks for their current market price in the hopes of seeing a return. Say for instance you told your broker you want a market order of 25 shares for McDonald’s. Each share is worth £182.53 at the time of your purchasing. If for whatever reason McDonald’s shares go up, you will have made a profit from your market order1.
Limit is another simple order you can give to your broker. This basically sets a limit to what price you’ll pay for specific shares2. You do this in the hopes that you’ve bought shares at a low point, and that they will increase over time. Again, we’ll use the McDonalds example. Say you put a limit of 120 on your order. This means that the transaction won’t execute until McDonald’s share prices fall under £120. So, you would buy them at a low point. And then, if shares in McDonald’s went back up (as they probably would sooner or later) you will have made a profit.
All or None
The standard procedure when you a buy a large amount of a company’s stock is that your broker will take their time to fill your order over hours but often weeks. This is done to stop you from manipulating the price of stock by affecting it with a single, huge order. There will come times, however, when you want to place an order at a single, normal price. This is what is known as an all-or-none trade3. This communicates to your broker that there is no way you want a trade executed unless it can be done in one singular order.
The markets are some of the most unpredictable things in the world. They are affected by economic, political and often cultural changes as well4. So if you are going to enter into the fray of stock trading you need to have this in the very forefront of your mind. Stock trading should never be seen, at the very start, as a stable income that can support you or your family. It takes a certain amount of time to find your sea legs in the unforgiving waters of the markets. The only way to solve this instability is to plan ahead, make sure you are able to commit the funds that you are promising, and always have a plan B.
Don’t get overexcited
So, imagine this. You check your quarterly report to find that all or most of your stock is up a substantial amount. You’re extremely happy about this. So what do you do? Do you call up your stockbroker and try and capitalize even more on the good news, trying desperately to have some of the same good fortune? No. This is not a good idea. You need to put a stopper in your excitement. This is because market hyperactivity can be the forbearer of your downfall. The really fantastic traders know when to play it calm and take what they have been given.