Trading can be a very lucrative decision if you are in there for the long haul. But the question that most beginners face is how to get started in trading. Here is a detailed guide on how to start with trading, steps you need to take and points to remember:
Stock Broker Account
The first thing you need to do is to open a stock broker account. There are plenty of stock brokers and investment companies who provide online avenues and mobile app services and charge reasonable fees. Make sure that you go through their terms and conditions and understand their fee structure.
Find a Mentor
This is true for every business or investment line and trading is no different. If you are a beginner in trading, you need to find a mentor or someone who can guide you through the market and make trading simpler. You may want to consider a company like Simpler Trading, who has a team of experts to help clients achieve success.
There are different types of trading options like:
~ Call option – Call options are like legal contracts that provide their owners the legal right to purchase the underlying asset at a pre-agreed price in the future. You will most likely buy a call option when you are positive that the value of the asset in question is going to rise in the future.
~ Put option – Put options, on the other hand, is the exact opposite of call option. Under this option, you are given the right to sell an asset in the future at a pre-agreed price. So theoretically, you would buy a put option when you are positive that the value of the given asset is going to fall in the future. Under both call and put option, there is an expiry date on the contract. So you cannot wait forever.
~ American style options – American style options does not mean that you have to buy them at a specific location, but it means that the terms of the contract will be dictated by that place. Call and Put options as discussed come with an expiry date and when the date comes, you can either buy or sell the given asset respectively. But if it is an American style option, then you have an additional benefit, the right to exercise any time before the expiry of the contract.
~ European style options – European style options differ from their American counter slightly in a way that you do not have the third option. This means you can buy and sell only at the time when your contract expires and not before that.
The point here is that if you are a beginner, then you need to hire the services of an expert, who know what they are doing. It is their job to make sure that your investments remain safe and give you suitable returns.
What sets these experts and their membership apart is that when you join them, you also get to benefit from a strong community of investors who are already profiting from their expertise and knowledge. This strong investment minded community of traders share a combined knowledge of over 200 years.
Tax
Whenever you buy shares, you have to pay taxes. Not only this, when you make a profit on your shares, even then you have to pay taxes. You may or may not like it but it is there and for everybody.
Before you start investing, make sure to understand the tax structure, percentage applied and general rules and regulations. There is some tax exemptions available based on how long you decide to hold your stocks and how much profit you are booking. This will help you stay ahead of the game. Understanding the tax structure will also help you save your hard earned dollars. Any time you can save money during a recession that never ends and in a high tax environment is a wonderful thing.
Books and Investors
Apart from getting help from an expert and learning your way around the tax structure, it is also recommended that you buy and read some books on the topic. Follow salient and fantastic investor minds of our time like Warren Buffet, Franklin Templeton, Benjamin Graham, Peter Lynch, and Paul Tudor James. This will help in building the groundwork, like a foundation on which your future will be built.
News
Every morning follow the news on Yahoo Finance or Google Finance. This will give you an overview of what to expect from the day and the top stories of the day. In case you are looking for in depth coverage of the stock market, then you can also start following Wall Street Journal. Technology has made it easier to do this all on your smartphone.
All the knowledge in the world cannot help you if you fail to take a decision and act on it. Wayne Gretzky once said “you miss every shot you never take” and this correlates here since if you do not make decisions based on this information you will not benefit like you could.
It is paramount that whatever you have read and understood here, you begin to practice it as soon as possible. Hire the services of an investment pro, choose paid subscriptions to improve your knowledge and education, and start implementing what you have learned.