Before the advent of the Internet, the world of trading stocks was a closely-guarded realm that required a Herculean effort to become a part of. It involved a long, grueling process that usually began as an intern with a brokerage firm in a major metropolitan center with links to Wall Street, and you had to sometimes literally work your way up from the mail room for an opportunity to begin learning how to trade. Even if you wanted to invest your own money in the stock market, you would need to go through a broker in order to accomplish your goals – it was nearly impossible to interact directly with the markets.
However, things are much different now. Thanks to brokerage firms that operate exclusively on the Internet, you can begin placing financial trades from the comfort of your home or office. However, there’s more to becoming a successful stock trader than simply signing up at one of these online brokerage companies and dumping your life savings into the market. You’re going to need to know some very important things before you get started, so here are just a few of the secrets that every stock trader has to learn if they want to be successful.
Choose Your Trading Style
One of the most important decisions you’re going to have to make in your path to becoming a successful trader of the financial markets is, what your trading style is going to be. All of these general strategies come with their own collection of benefits and drawbacks, and some may be more challenging than others – especially if you’re new to the trading scene and might not understand the differences of each trading style.
There are three main strategies you can employ when it comes to stock trading. You can simply buy and hold positions in any market for very long periods of time bordering on years or even decades, or you can trade these markets after several weeks, months or years, or you can complete all your trades within one 24-hour period. Day trading, the last choice, is easily the most challenging and fraught with the highest levels of risk, though it can result in major rewards. Long-term trading and buy-and-hold trading, by comparison, offer lessened risk in exchange for fewer opportunities for reward.
While it’s recommended by some for brand new traders to get introduced into in long-term or buy-and-hold trading, there’s nothing stopping you from jumping into day trading. You can, of course, engage in more than one strategy when it comes to trading the financial markets. Many experienced traders will have separate portfolios for their buy-and-hold investments and their long-term trades, and even those impatient and motivated enough to engage in day trading will often have less stressful longer-term investments cooking on the back burner just in case.
Choose Your Trading Days – and Times – With Care
Market conditions fluctuate all the time, but there are some constants that analysts have discovered over the countless years of keeping a sharp eye on the markets. To that end, research has shown that when it comes to the best time of the month to make stock purchases, this is typically the third week of the month, specifically between the 18th and the 22nd. Prices tend to hit their lowest monthly points at this time, as cash flows from dividend reinvestment and pension funds are likely to be at their lowest as well.
To that end, this makes the best time to sell your stocks closer to the beginning and end of every month, when cash flowing into the system is at its highest. On a seasonal level, April and May are some of the most successful times to sell your stocks, while buying new stocks aggressively in September and October, when the market tends to bottom out, is going to get you the best price.
Meanwhile, there’s a right time to trade for day traders as well. Unless you’re trading in multiple international markets around the world, the best time for a US based day trader will typically be in the late afternoon Eastern Time, when the entire country has at least begun their work day. With corporate earnings reports and statistical reports from the federal government usually released in the morning, waiting until around 1:30pm to 2:00pm will allow time for the investors to relax in the face of sudden, market-shaking news.
Education Is Key
While nearly anyone can open up an online trading account if they have enough capital to do so, this doesn’t mean that you’re going to be successful right out of the gate. In fact, if you’ve never traded before a day in your life and you simply think you’ll be able to dive right in without at first educating yourself, you’re likely to end up learning the hard way – by watching all your investment capital disappear into the ether in exchange for a handful of stocks that end up not worth much – or worse yet not worth anything at all.
There are any number of stock trading courses available to take, many of which are available right over the Internet. Some of them are free, which are an excellent place to start, while others do require an investment. However, in the case of the expense of a few online trading courses, the cost of your ignorance might be much higher if it means exhausting your stock investment capital too soon and having nothing to show for your efforts. It’s a lesson you’ll end up learning in one way or another, but it’s better to learn it from someone who knows what they’re doing instead of having to learn it yourself.
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