What You Need to Know to Make Money on the Stock Market?
6 minutes for reading
Financial markets are a completely different world. If one manages to get comfortable here and learn how to choose instruments to invest in, then in the future they can get access to the things that all people strive for – freedom, independence, and a chance to work for themselves. However, in order to achieve and get all of this, one must learn a lot and work hard on themselves and their emotions. When trading on the stock market, it is possible both to earn good money and lose some of your own funds in case of wrong choice of companies.
Why do I need to invest?
Unfortunately, if your money doesn’t work and just lies in a jar, it takes a beating because of the high inflation. If we invest money in a bank, in most cases the interests we receive barely cover the inflation, while the fall in your national currency exchange rate may put even such seemingly reliable ways of saving money in jeopardy. The real estate market is not always attractive as well.
As a matter of fact, the stock market is one of the most promising ways to get profit provided that you have seed money. This factor is very clearly described in a movie called “Limitless”. The main character takes a new nootropic, which makes his brains extremely powerful. Using these abilities, the character earns a pile of money in a very short period of time. and the stock market is exactly the place where he accomplishes it.
How is your profit generated?
On the stock market, when buying stocks (securities), investors acquire a share in a company. Therefore, if the stock price grows, then one can profit by selling them in the future. Apart from getting profit from buying/selling, one has an opportunity to get dividends, which are a part of a company’s revenue for a particular period of time, for example, a quarter.
It is believed that the simplest way for beginners to earn money on the stock market is just buying stocks and waiting for their price to grow. Another method is to invest in companies in anticipation of some major events, such as the next presentation of Apple. As a rule, the stock price may go down before the presentation, but after the company reveals its new products, it starts rising or even skyrocketing.
Where to start?
Nowadays, people trade online, that’s why the first thing you need is internet access.
- Decide on the investment amount. It’s very important not to risk big sums of money, loss of which may radically change your life. Another thing is that one should not trade with borrowed funds. Many authors from Europe and the USA recommend to start trade with the sum you won’t regret to lose.
- Choose a broker to buy and sell stocks through. A good article How to Choose a Forex Broker was earlier published in our blog.
- Choose a trading strategy. The method you choose will tell you what stocks to buy or, like professional traders and investors say, provide signals for buying and selling financial instruments. For example, one can try strategies for beginners based on Moving Averages. It’s a simple but at the same time efficient tool for analyzing stocks; an important advantage here is trading towards the primary trend.
Mistakes that beginners make
There is an opinion that in order to become a real trader and get permanent income on the stock market, one must gain experience that will help to avoid making mistakes in the future. Needless to say, that in the early going traders tend to “go to pieces” and take on real risk. Experienced authors can recommend something here as well.
- Trading towards the primary trend is one of the key rules. If the stock price rises, it is believed that they should be bought, while in case of decline it would be better to get rid of them.
- Don’t trade if you don’t see fair opportunities for that. We are recommended to stick to the strategy, which we must choose before starting to trade. If the strategy doesn’t provide signals at the given moment, it makes good sense to patiently wait for such signals and only after that start making decisions whether to buy stocks or not.
- Let your profit grow and close your loss-making deals. If the stock price rises and your profit increases with each day, don’t be in a hurry to sell them – on the contrary, you should wait until your profit goes higher. However, if you see that stocks generate losses instead of profit, it will be wise to sell them in order to avoid more significant losses.
- Trade with protective stop orders. Before opening a position, you should in advance set the price, at which the positions will be closed with a loss. Anything can happen on the stock market, that’s why it’s very important to estimate risks you are willing to take.
- Don’t average loss-making positions. If the stock price falls, we are recommended not to buy more to avoid increasing the loss-making position. It makes sense to close this deal and start looking for new and more promising stocks.
The stock market offers excellent opportunities to make money and one can start with any sum of money. We get an opportunity to invest in the best global companies. However, along with profits, it involves risks of fall of stocks and at such moments traders can lose their funds. For successful long-term work, one must gain experience in their trading strategy and learn how to deal with emotions and risks
Jesse Livermore, one of the greatest traders of the 20th century, said that he managed to make big bucks due to two crucial factors: his patience and perseverance. Hence, your career in the stock market depends only on yourself.
P.S. If you are interested in the stock market, you are thinking about creating your own investment portfolio and buying shares of various companies, but don’t know how to do it and where to start… Especially for you, we have a post with a step-by-step guide on how buy stocks through a broker.
See you later!