Friday, January 4, 2013

How Do You Start Investing Money in the Stock Market? ~ From a Newbie's Viewpoint

Time and again, working people and business folks alike want to earn more money from other sources rather than their day job or their business' normal day-to-day operations. Of course, if there are chances, why not take them, right?

Often, the stock market is a popular choice among other sources of income. Having to trade stocks does not need a physical store to capitalize on. It does not need employees, as you analyze the trends and do the buying and selling of stocks yourself. What's more, you only have to read and make predictions to win (or lose) in the stock market.

How to start investing in the stock market has been a popular question thus. This has been answered like hundreds to thousands of times by experts. In this article, let me explain how to do it--in a newbie's view. This is so that you can learn the basics from someone who learning the ropes in trying to play in the stock market game firsthand.

Lessons from Stock Market Trading 101

I have attended many seminars (online and offline) regarding stock market trading. Common things said are as follows:

1. Don't treat stock market trading as an ordinary pastime, unless you are willing to lose tons of cash!

Most people, as mentioned in the intro, treat making money in the stock market as another activity to widen their source of income. The steps to climb the ladder to buy and sell stocks are pretty easy. However, the stock market industry is very complicated in reality. Trading in it requires vast knowledge about world trends and thorough research about companies that reveal stock market prices to the public.

2. Buying and selling of stocks call for real effort and not sheer luck.

Without knowing the open-close values of stocks each day compared to high peaks and low valleys that make up as exceptions, you won't have good and proper predictions of the change in prices of stocks.

Trading in the stock market is not plain gambling. Lucky guesses won't ensure the right choices. There must be good logic and skills involved to put your account to the right course.

3. Practice with the traditional approach of paper trading.

Now we can trade in the stock market online. One buy or one sell transaction is equivalent to one click only. In that one click of a button, money is lost or gained. The Internet makes it more tempting for us to "gamble" then?

Experts strictly advise to follow the method of placing the trades on paper and calculate the profit or loss of each transaction manually. Then graph the stocks on a graph paper every day, to study the trending of the interesting stocks chosen. This practice will give newbies a better comprehension of what stocks to focus on and not just randomly choose stocks to buy and sell.

4. Trade in smaller units first.

If you are new to the stock market arena, don't be overly confident and lose all your investments in one blow. Start to trade only in smaller units until you have further understanding of profits and losses made.

When you have reach this higher level of readiness, you can arrange your diversified portfolio. Balance your risks with a mix of penny stocks, middle caps and blue chips. Choose different sectors of stocks with various commodities (e.g. oil, mines, food, real estate, etc.) This is for you to get well compensated and balanced out in case you turn to a loss hugely in one stock domain.

5. Keep up with both local and global news.

Don't assume that just because you are trading solely in your local stock market that global news won't get your stocks affected. In truth, everything is interconnected. Companies are potentially merged with financial capabilities and investments of international companies' stocks and shares as well. So you have to be updated with everything that is happening in the industry and related industries of your chosen stocks. Don't blindly buy and sell and take ideas from your seatmate.

End Notes

Be familiar with the terminologies used in the stock market and get the edge of reading books and online guides. Also, online forums which discuss the latest stock market trading tips are helpful to get you more ideas. Investigate more after reading these references and utilize the trading tools for prediction. If you are not contented with the free version, and if you feel that you have to advance to the next step, consider investing in paid trading software to boost your analysis on stock trends.