Anyone who’s grown their money by investing in stocks knows the importance of being cautious and thinking things through before making a move. While being successful at stock trading can ensure your financial security in the future, there still are a lot of risks that come with this investment vehicle. That’s why in this post, we’ve listed below the 3 things every beginner should have if they want to find success in stock trading.
Enough Money to Invest
When it comes to investing in stocks, you have to make sure that you’re comfortable enough to shell out cash for your capital. But other than that, you also have to ensure that you have enough balance in your account as this will determine the kind of trading you’ll be able to do. For those who are looking to make money through day trading or make dozens of trades per day, the SEC mandates that your account should at least have a balance of $25,000. Meanwhile, swing trading — or trades that happen over a period of days, weeks, or months — do not require a minimum capital requirement. However, it’s recommended that swing traders should at least have $5,000 to $10,000 in their accounts to mitigate the risk on the trades they make.
For beginners, investing $200 to $1,000 on a particular stock is a good way to get started. But to further ensure your success in stock trading — whether it’s day trading or swing trading — you should look beyond the minimum capital required. More than just being able to afford a single share of stock, will your capital also allow you to diversify your portfolio? Will you be able to protect your profit from trading fees? Not evaluating your finances can raise your risk with stock trading, so before you dip into your savings, do make sure that you’ve checked all angles and secured your personal funds.
A Reliable Brokerage or Stock Trading Platform
You won’t be able to buy and sell stocks simply by going to the stock market. For traders, they need to employ the third party services of a broker to participate in the stock market. The main job of stockbrokers and trading platforms is to buy stocks from sellers and sell stocks to buyers — all on behalf of a client (or most likely, a number of clients). These facilitators often make money by receiving a commission from a trade.
Of course, not all brokerage accounts are made equal, and they come with different levels of support, reliability, and cost. For one, while financial planners can give you a better insight into your finances and how to invest it, this usually comes at a premium price. On the other hand, you can also choose to use the services of an online stock trading platform. Aside from having comparatively lower fees, you can easily manage your investments on your computer. Overall, beginners should first employ the services of a trusted financial planner if they don’t have the know-how, but if you’ve done your due diligence, then saving a ton of cash with an online stock trading platform isn’t a bad idea.
A Robust Trading Strategy
Lastly, every stock trader should already have a tried-and-tested strategy before they participate in the stock market. But, how can beginners land on a trading strategy without having any experience in trading? First, consider reading as much as you can about stocks to learn how the markets move. Books, seminars, and other resources can all help you land on a trading strategy that works, like intraday trading or position trading.
Plus, you can also use demo accounts to practice placing trades. Here, you can place fake money trades to test out their knowledge, figure out which strategy works best for you, and practice proper risk management. Furthermore, you can also use demo accounts to find out which online stock trading platform is the perfect match for you, since almost all of them offer this feature. By trading stocks using a demo account, you get to sharpen your skills and build a good foundation for your future stock investments.