One of the reasons why stock traders lose part of their investments over time is that they fail to make proper research about stock trading before proceeding to trade stocks. Trading stocks is in itself a risky investment and to minimize the risks involved in stock trading, the trader needs to make proper research about the stocks to buy and the best stock brokers to trade with. To trade stocks in the UK for instance, the trader needs to learn about UK stocks before proceeding to choose a UK Stock Broker to trade with. This work has therefore examined the major factors every stock trader must consider before investing in stocks today.
What is stock trading
Stock trading involves buying a company’s shares from the exchange market or using an intermediary called a broker. Trading stocks allows investors to benefit from the future growth of the company’s products and services.
Things you need to know before you start trading stocks today
Before proceeding to trade stocks there are some important factors the trader needs to find out. We have discussed these factors below:
- Stocks to trade:The first thing every trader needs to consider before trading is the country stock to trade. This will make it easy for him to search for those stocks on the broker’s platform. Thus we have US stocks, UK stocks, German Stocks, Hong Kong Stocks, France Stocks, etc.
- Choice of broker:Brokers are the link between the trader and the market. Without them, it will be difficult to buy stocks online. However, there are different types of stock brokers that the trader needs to choose from. Here we have the CFD stock broker, General Service stock brokers, Discount stock brokers, etc. Also before proceeding to trade with any of these brokers, the trader must confirm that the selected broker is registered and regulated.
- Major Factors that move stocks:Understanding the major factors that moves the market such as the Fundamental and technical factors helps the trader to know when to buy and sell a particular stock. The fundamental factors refer to major news about the market and the particular stock one intends to purchase. This affects the price of such stocks after the news has been released. The technical factors embrace the price actions which describe prices reacted at certain levels known as support and resistance.
- Trading strategy:An important factor that guides traders while trading is the trading strategy he develops for trading. There are various strategies used for trading such as: Swing trading, Scalping, Day trading, etc.
- Take profit target:Often stock traders look up to selling their assets in the future when the price appreciates. Hence, most traders set their set profit target while trading.
- The risk involved in trading:Stock trading is in itself a risky investment as there is no guarantee for profits. While investors look up to selling their purchased stocks in the future when the prices appreciate. There is, however, no guarantee that prices will keep rising over time. In cases of capital devaluation due to loss of value in the purchased stocks. The trader will have to bear the loss alone without blaming anyone for it.
Advantages of trading stocks
- Could serve as an alternative source of income
- Often investors use it to hedge their capitals from devaluation due to rising inflation
- Offers an investment package to investors
- Exposes one to the financial market
Disadvantages of trading stocks
- It is a risky investment package
- Prices of assets purchased could fall over time.
- Consumes time and energy in identifying the stocks to trade.