Stock Trading: Where to Start?
This is not financial advice. Your capital is at risk with any type of investment; profits may be subject to tax; and the value of any investment could fall.
As a money blogger I’m often inundated with questions about shares, investments and stock trading. While I love to promote the many ways in which you can increase your income and gain financial freedom, I certainly wouldn’t consider myself an investment expert.
However, I recently discovered Michael’s website shiftingshares.com. Michael was an investment hobbyist and is now a full-time trader and investor. He shares what he has learned on his investment journey, as well as exposing common trading scams.
If you’re interested in exploring stock trading and would like to learn more, this post will provide you with the basics of what to expect, some warnings and where to find more information.
Stock Trading: Where to Start?
What is Stock Trading?
The stock market is an aggregation of buyers and sellers of stocks. These stocks represent ownership claims on a business. To be listed on the stock exchange a company has to complete an Initial Public Offering (essentially taking the company from being private to public), once completed, their shares are available to buy. You could for example buy amd shares, shares in amazon or telsa. The buyers then invest in these shares in the hope that the company will do well and they will get to profit from its success. Successful stock traders buy and sell stocks, capitalising on the daily price fluctuations and making profit as they go.
A common way to buy shares is from an online ‘share dealing platform’. These platforms allow you to buy shares from any company listed on the stock exchange. The London Stock Exchange is where you will find most major companies based in the UK and the Alternative Investment Market is where you will likely find smaller emerging companies.
The price of a stock is determined by supply and demand at the time. The higher the demand of a certain share, the higher the cost will be to purchase. A high-priced stock is still affordable through the process of margin borrowing. Margin trading is when you borrow money from your broker to pay for stocks, and that may be a good idea if the expensive stock belongs to a company with a good track record.
KNOW THE BASICS
Investors should understand the market index (a portfolio of securities) and the different stock investment strategies to gain better financial market insights and boost their return on investment (ROI).
Stock traders can engage in active trading or buy-and-hold strategy. Active trading involves buying and selling stocks based on a short-term stock chart’s short-term price movement. On the other hand, the buy-and-hold strategy, in which passive investors buy stock and hold them for a long period despite market fluctuations.
One of the active stock trading strategies is day trading. This term refers to buying and selling securities within the same day, wherein investors can take advantage of small price moves using the right tactics.
Another type of active trading is position trading. This trading strategy is suitable for advanced traders who base their buying or selling decisions on longer-term charts and other methods to determine current market trends.
Aside from stock trading methodologies, investors should know the differences between stock exchanges. This knowledge gives investors a better view of investment opportunities and exposure to indexes and their steady growth.
Investment Warnings
Your money is at risk when you invest in the stock market. There are no guarantees when it comes to any type of investment – your money can go up as well as down in value. Factors such as economic growth, recessions, inflation, interest rates, currency fluctuations, etc. are all unpredictable and create volatility and risk in the stock market. However, websites like Alpha Spread can help you calculate a stock’s intrinsic value, which allows you to make smarter investments.
Don’t be fooled by the promise of easy money. Beware of people contacting you out of the blue inviting you to invest in shares. And be wary of displays of flashy clothes, gadgets and claims to have turned £100’s into £10,000’s overnight!
Michael offers some advice on staying clear of scammers. He advises using a well-known, UK regulated broker. Visit fca.org.uk/scamsmart for warnings and check with Companies House to see if the company actually exists (even if it passes both tests, don’t assume it’s legitimate). He also suggests hanging up on cold callers: assume that all cold calls are scams! And remember that traders aren’t fashion models: beware of people bragging about their flashy lifestyle.
Online Stock Trading Course
Michael, a full-time trader and investor, has created an online course to help those of you looking to learn how to trade the UK stock market. The course has sparking 5* recommendations from industry professionals, includes 44 individual lessons and 8 hours of training. Whether you’re a beginner or experienced trader wanting to learn and develop, Michael’s course is highly endorsed.
You can also gain access to Michael’s free ebook collection, including ‘How To Make Six Figures In Stocks’ and ‘Ten Habits of Highly Profitable Traders’ by visiting shiftingshares.com.
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I’m new to the world of stocks and shares and have only dipped my toe into investments. I’ve spotted lots of scammers trying to lure people into trading and that has made me even more cautious. I’d love to know what experience you have of stocks – be that bad or good. Let me know what you think of trading and whether its something you would like to try or will be avoiding in the comments below.