Money and financial assets are essential possessions that an individual can’t live without. Despite people’s daily involvement with money, managing and discussing it remains taboo to society, when, in fact, financial education should be taught to everyone.
As Robert Kiyosaki said in his bestselling book Rich Dad Poor Dad, ‘Don’t work for money; make it work for you.’ People should find creative ways to make more money with less effort and time. Essentially, there are ways to generate money without working for it tirelessly, like stock trading.
Stock Trading and Investing
Stocks are ownership certificates of a specific company. When you own a stock, its corresponding value represents your share or partial ownership of the company. Depending on that company’s performance, stock prices may go up or down. Businesses issue stocks to raise capital, and they’re either listed on a public venue called the stock market or offered only to private investors as over-the-counter (OTC) stocks.
Before going further into this guide, take note that there aren’t one-size-fits-all steps towards trading success. However, determining your risk tolerance and trading style can bring you closer to fruitful results. For instance, stock trading is primarily suitable for buy-and-hold investors or individuals who maintain a stable portfolio within an extended period. Stock trading is less risky and volatile, thus providing investors with a higher level of comfort.
Meanwhile, foreign exchange trading or forex trading involves exchanging foreign currencies against one another for tourism, trading, and commerce purposes. If you’re an investor who favors higher liquidity, prefers 24/7 trading, and possesses a thorough understanding of economic indicators, forex trading can be the right choice for you. You can use an online forex compound calculator to estimate your potential earnings from trading currencies.
The Stock Market
Upon hearing the term ‘stock trading,’ most trading beginners will initially think of the stock market. Understanding the market and its conditions can help you navigate the trading world with knowledge and confidence.
The buying and selling of shares occur in the stock market. In this channel, sellers and buyers can trade investments with one another, or buy and sell their shares to stockbrokers or professional traders. Presently, these are the world’s top stock exchange markets and their estimated market value:
- New York Stock Exchange (NYSE): USD$28.19 trillion
- Nasdaq: USD$12.98 trillion
- Japan Exchange Group: USD$5.37 trillion
- Shanghai Stock Exchange: USD$4.92 trillion
- Hong Kong Exchanges: USD$4.48 trillion
When the market goes up and down, this is referred to as the market index. The numbers and figures present in the stock index signify the performance of a specific stock group. The Dow Jones Industrial Average, S&P 500 Index, and the Nasdaq Composite Index are the most prominent stock indices today.
As an investor, you can utilize the stock market index to gauge your portfolio’s performance as stocks fluctuate. These indices allow you to assess the health of the stock market and determine how much you can risk losing in the bigger picture.
Starting Your Stock Trading Journey
Now that you’ve familiarized essential stock trading terms, definitions, and mechanisms, this part will walk you through the process of being an official online stock trader to start your journey:
- Find an online broker and open your trading account. First and foremost, it’s best to open a stock brokerage account dedicated to your earnings as an online investor. An online stock broker can assist in your investing journey. Depending on your investing field, risk profile, trading approach, level of help required, investing goals, and other factors, there’s a right broker for you.
- Research and analyze. Trading always comes with gains and risks, and you should be ready for both of these situations. As you’re only starting with trading, don’t be too excited and go all in as successes don’t happen overnight. Researching, analyzing, and understanding are part of the learning process.
- Practice trading before entering the actual trading world. To apply what you’ve learned from your trading lessons, you can participate in paper trading or virtual trading, a stock market simulator that helps you familiarize yourself with the process of stock trading.
Bottom Line
Stock trading is one of the hottest ways to stay on top of one’s financial game today. Perhaps the most important lessons in stock trading are also highly applicable in real-life. When the stock market rises, you’ll make money; when the stock market drops, you’ll lose money. Since there are opposite sides on the spectrum, the ultimate key lies in managing your risks, setting your fears aside, and allowing yourself to grow financially.
