The trading market is large and is filled with numerous investors and traders. Many more enter the market each day.
Entering the market may be a little challenging especially for a beginner. However, there are plenty of resources that can help a novice get started. If you are just starting, then getting started with the Netherlands-based Saxo Bank user-friendly platform is a good option. Let’s take a closer look at what stocks are.
What Are Stocks?
Stocks are financial instruments representing ownership within a company. Owners of stocks have a claim on the assets and profits of the company. The claims are directly proportionate to the number of stocks owned. In other words, stockholders, own a little piece of the company.
A stock trader can buy or sell stocks. They capitalize on fluctuations in prices within the market. Stock traders mostly focus on short-term profits rather than gaining in the long term.
Types Of Stock Trading
There are two main forms of stock trading.
- Active Trading
Stock traders whose main focus is making a profit in the short term use this strategy. They rely on fluctuations in short-term events. These variations may be within the market as a whole or simply company-based. Regardless, they can be a source of income to investors over the coming weeks or months.
- Day Trading
Investors use this strategy to open and close trade positions within a trading day. These kinds of stock traders rely on fluctuations in prices within minutes, hours, or a single day to make their profits.
How To Trade Stocks
For first-timers, trading may seem complicated and perhaps not even worth the effort. However, if done properly and traders have a sufficient understanding of the market, trading can be quite rewarding.
- Choose A Broker
A good place to start is by selecting a broker to work with. It is important to do your research before determining the legitimacy and track record of the company.
- Open A Brokerage Account
Once you have selected a broker, you need to open a brokerage account. Investors need this account to trade. They are designed to hold any investments the investor may have.
Even if you are not quite ready to begin stock trading yet, getting through this step is good preparation.
- Set A Budget
For the best and safest experience, trading should be planned. Investors need to come up with a budget of what they intend to invest. This will lower the risks of losses and even reduce the exposes to excess volatility. While setting up a budget here are a few things to consider;
- Risk tolerance – This refers to the amount of money an investor can afford to lose. The amounts differ between investors but the general principle is the same.
- Expenses – Investors should avoid using earmarked money (money set aside for a specific purpose) for near-term expenses.
- Savings – Part of budgeting with investment returns involves saving a percentage of your earnings. Investing in yourself is very important. Consider putting some money into an emergency health fund or a retirement fund.
- Virtual Trading Account
Traders, especially beginners should invest a good amount of time learning how to trade. A virtual trading account is a good way to practice without the fear of making huge losses. This essential trading tool is one of the many services that Saxo Bank in the Netherlands offers.
Why Invest In Stocks?
Traders can buy stocks from companies. Owning shares in a company can give shareholders a level of influence when it comes to decision-making. This majorly applies to longer-term traders with slightly large investments. However, even short-term investors benefit from the profits the company makes.
- Better Than Savings
Investing in stocks is better than a savings account because of the returns they offer. However, investors face the risk of potentially losing entire investments in case things go south.
Stock trading is a lucrative way for investors to generate some income. It has many benefits but it also has its risks. It is a market with few barriers to entry. Even beginners can benefit from it if they take the time to learn and understand things.