What is stock trading? - What it takes to trade stocks
What is stock trading?
Stock trading is an activity that has gained in popularity and that allows you to trade in the different stock markets. We discuss what is stock trading and everything you need to know about this popular activity.
What is stock trading
The word "trade" means "to trade", so stock trading is nothing more than the buying and selling of company shares or derivative products such as commodities. It is also possible to trade Forex, i.e. currency pairs. The objective is always to obtain a capital gain.
How the value of a share is calculated
Before moving on and learning how to calculate the value of a share, you will have to learn a concept called "nominal value". We say that the par value of a share is the figure obtained by dividing the capital stock of a company by the shares issued.
However, the nominal value does not necessarily correspond to the value of the share in the market. This is because this real value is the result of dividing by the net worth and not by the capital stock. In addition, the price of a share in the market does not have to be exactly the nominal value or the real value.
When to sell a share
If only we had the ability to always sell into winning positions. But markets are sometimes unpredictable and our knowledge limited. But you should keep in mind some tips for knowing when to sell a stock.
First of all, and we will not tire of repeating it, but you must be able to answer 2 questions coldly.
If I am making a loss, is it time to take it? If I am making a profit, can my shares go higher?
Keep in mind a fundamental maxim, if our shares have gone up a lot, they will also have the capacity to go down. Assess whether the gains, which are usually estimated as optimal between 20 and 25%, are more than enough. Also think that what you do today, selling that stock, may be better now than later.
What it takes to trade stocks
Anyone can trade stocks, at least, a priori. That is perhaps the mantra that keeps being repeated, especially by stock market gurus. Keep in mind that there are thousands of people like you, eager to make a profit and enter an exciting world. But to trade stocks, or commodities or currencies, you will need 3 things.
**A start-up capital: this will be determined by what you want to invest. It is always advisable to have a limited budget, which does not have to be high at first. If you do not have money, there are platforms, most of them, that have demo accounts.
**Strategy: a strategy when trading will determine where you want to go and how to do it. There are many trading styles, each of them adapted to an investor profile and that will make you operate in one way or another. Knowing them well will give you the keys to adapt your lifestyle to your investment lifestyle and be able to act in the best way.
Training: jumping into the pool without water always has catastrophic effects on your finances. Besides, nowadays you have the possibility of acquiring quality stock market training from many sources, and without having to make any previous investment. Remember this advice that we always repeat, run away from anyone who promises you to earn a lot in a short time. The only thing they want is your money. Go slowly and take small steps.
Learn fundamental analysis
**Learning fundamental analysis is one of the keys to good stock trading. Fundamental analysis is defined as analysis that attempts to determine the price of a stock theoretically. To do this, it studies all the variables that can affect that stock. This analysis does not determine whether a stock will go up or down, but what its fair price should be.
Learn technical analysis
Technical analysis, on the other hand, focuses on the stock's movements, i.e. whether it will go up or down. To do this, it makes use of different predictive and analytical tools. The father of technical analysis is Charles H. Dow, who created the Dow Jones index, which is made up of the 30 companies with the largest market capitalization on the New York Stock Exchange.
Learn to manage your emotions
When it comes to trading stocks, you must always take one thing for granted: emotions must be put aside. It is difficult, especially at the beginning, but the success of stock trading lies, in part, in our ability to trade with our heads. If emotions affect you or you let yourself be carried away by impulses, the chances of failure increase exponentially. This principle is very simple, we will let ourselves be carried away by irrational actions that leave out our capacity for analysis. A very typical situation is that of those who have lost and automatically invest in another security quickly to cover those losses. This is an irrational act that is likely to result in another losing position.
Possess money you don't need.
The stock market is entered when we have capital that we are willing to lose. It does not mean that we go straight to failure, but that the loss of that money is assumable and does not upset your economy. Of course, you never trade in stock markets with borrowed money, nor do you take out a loan in the hope of getting your money back in return. Remember emotion management?
You can be one of them if you set your mind to it, but you must be very clear about your strategy, how you are going to do it, and how much you are willing to get involved. You don't have to be a full time investor, you can take it as an activity that gives you personal and economic satisfaction and, at the same time, provides you with very useful information for many areas of life.
DEMO account with $10,000 so you can test it as much as you need before using real money.
In addition, you can earn money by helping others to earn money, by sharing your trades, or by copying the trades of more experienced traders. Discover the benefits of social trading.
Learn about Social TradingSocial Trading is a new system that gives everyone access to the world's best traders. You can follow top traders and automatically copy their trades. You make money when they make money with no trading expertise required. This is the Social Trading revolution.
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