3 Top Tips for Stock Trading

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If you were type the search term stock trading into Google, you will find yourself inundated with a number of pages delivering in-depth, tactical advice.

While this is extremely beneficial for experienced investors who are looking to hone their existing skills, however, it is far less effective for beginners who are looking to make their first trades. For these individuals, it is far better to adhere to basic, deterministic advice that provides them with a foundation of knowledge, from which they can gain a foothold in the market and scale their efforts over time.

With this in mind, here are three top tips that will enable novice stock market traders to accrue wealth and gain greater understanding of the pastime: 

  1. Understand Your Trading Portfolio and Risk Appetite 

While the stock market may be decidedly more stable than the foreign exchange, not all shares or vehicles have been created equal.

So while there are blue-chip stocks that can deliver sustained and incremental returns (usually through the process of dividend investment), there are others that provide a far greater risk to reward ratio. Dividend stock are usually traded as part of a long-term strategy too, as they offer reliable gains that can accrued gradually but over a considerable period of time. Conversely, it is possible to purchase ailing stocks at a low price in the hope that they will rebound in the short-term, and this is a riskier strategy that is determined by market and macroeconomic trends.

By understanding your own outlook and risk appetite, you can create a profitable stock portfolio that you are completely comfortable with. 

  1. Trade Through a Demo Account on an Online Platform 

Today’s generation of currency and stock market traders have been empowered by technology, particularly in the form of virtual trading platforms. These platforms have removed many of the barriers to entry historically associated with the financial marketplace, helping investors to optimise gains and manage risks effectively.

Not only this, but the majority of platforms also allow traders to hone their skills through demo accounts before they commit genuine capital. These accounts offer access simulated and real-time market environments, helping investors to gain practical experience of the stock market over a period of three to six months.

Then, they can take what they have learned and apply it in the corporeal marketplace, while bridging the gap between theoretical learning and practical knowledge.

  1. Trade Indices as Well as Individual Stocks 

On a final note, you should know that it is possible to invest in more than just individual stocks and shares through the market. In fact, you can also invest in indices, which relate to prominent stock indexes such as Dow Jones Industrial Average (DJIA) and the S%P 500.

Indices represent the aggregate prices of various stocks, with price movements revealing themselves as the cumulative effect of individual share fluctuations.

So in instances where a group of stocks are all impacted by a prevailing macroeconomic trend or event, speculating about the performance of indices can provide a relatively simple and effective way to earn. Such investments need to be managed carefully, however, as it can be hard to determine the general movement of stocks as a collective consideration.