Trading in the stock market is a very profitable endeavor. Many people have amassed great amounts of wealth from stock market trading and changed their lives in a very positive way, at least financially.
The advent of the internet and technology has made trading a lot more convenient and faster through online trading. In online trading, you can buy and/or sell stocks in just a matter of seconds through clicking the mouse making transactions so fast. In the fast paced lifestyle that most people have, it is the kind of trading that they want.
Though online trading may seem to be a much better way of trading compared to traditional methods because of its convenience, it has some pitfalls as well. If you’re a beginner in online trading, even though you’re already a seasoned trader in the traditional way, here are some things that you must know and realize before getting your feet wet.
1.) Find a reputable broker. Generally, banks have online trading systems in place. Some financial institutions also have their own online trading platforms as well. Look for the brokers that have good rating and feedback. One way to find a good broker is to read client feedback on stock trading forums and by simply searching the web.
Some of the most important things to consider in finding a reputable broker are: uptime and downtime, research, bandwidth, customer support, and user-friendliness of interface.
2.) Check the fees of brokers. Stock markets have fixed commission rates or fees. However, brokers may differ in commission rates but at a very slight difference. Generally, in buying and selling, a total commission rate of 1.5 percent is acceptable but anything higher than that is already expensive. In most cases, the rate of commissions of brokers are not considered as big deal to most traders but to those who want to maximize their profit, maybe it is something that must be considered.
3.) Be ready for an emotional roller coaster. Online trading can be done anywhere and anytime as long as there is an internet connection and as long as the market is open. Because of this, some experienced traders and huge fund managers can easily manipulate the market which can cause panic and fear. Stock prices are more volatile with online trading which can end up in whipsaws and lots of traps.
For experienced traders, you may stick to fundamentals in picking a stock. For beginners, there is a lot of learning to do. Learn about chart analysis, financial statement analysis and interpretation, and the psychology of the market. Of course, experience is the best teacher. For a start, focus on developing a trading strategy and don’t think of quick and instant gains. Huge and consistent gains will come after a careful and properly executed strategy.
4.) Do your own research. You can get information from your broker, from different forums, from news articles, and maybe from any random source on the net. Never rely on a single source and always make it a point to confirm everything that you see and hear before coming up with a conclusion or decision. Keep in mind that the stock market offers a great potential for you to earn big in a short period of time so generally, the amount of effort that you put in research and in decision making will most likely be the amount that you may gain.
Be cautious about forums. Never believe anything that you see in forums because in most cases, things in forums are prefabricated and are not real. What must you do about the things that you see on forums? Confirm it with other reliable sources. Though forums are full of false information, there are hidden gems in it.