8 Tips To Successfully Trade Stocks Online
In 2020, the COVID-19 pandemic changed countless aspects of our daily lives. And one of the biggest changes is that more and more people explored the world of online stock trading.
Part of this is due to apps such as Robinhood making it easier for amateurs to take up trading. And part of it is due to the pandemic keeping people inside the house. Just as many turned to video games as a form of escapism during the pandemic, many others turned to online trading as a way to generate extra income and even replace their primary jobs.
Are you interested in becoming an online stock trader? If so, our quick tips will help you get started exploring this exciting new world!
1. Find a reliable app
This bit of advice is quite simple: you need to find a reliable trading app.
There are multiple apps that may work for your purposes. Make sure the app in question is regulated by a governmental agency that you trust. On top of that, make sure that you can use the app on your desktop, tablet, and smartphone.
With a reliable app that works across all of your devices, you can trade stocks seamlessly throughout the day.
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2. Use a stop-loss order
Like any endeavor, some failures are inevitable when you start trading online. But there is a way you can mitigate how bad things will get when this happens. And that means always using a stop-loss order.
A stop-loss order creates a hard limit for how much you can lose. It is an order to your broker to buy or sell a specific stock once the stock reaches a certain price. A stop-loss order comes in the form of either a specific dollar amount or a percentage of an investment.
For instance, say you purchase a stock at $20 per share and create a stop-loss order at 10% below your purchase price. If the stock falls below $18, your shares will then be sold at the prevailing market price, limiting your loss to only 10%.
A stop-loss order helps to protect your money and can also give you the peace of mind to pursue future trades after a loss.
3. Take online trading courses
If you’re reading this, chances are you are pretty new to the world of online stock trading. And if that’s the case, one of the best things you can do is to take an online trading course.
Some of these courses are free and some will charge a small fee. But a good course will let you know about important trading vocabulary (so you understand the relationship between things like lot size and leverage).
You could always skip the course and try to figure everything out on your own. But take it from us: once you are trading stocks online, those failures can be expensive and will add up quickly.
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4. Buy the basket
The frustrating thing about stock investment tips is that they are rarely direct. You will rarely find someone who tells you exactly what to invest in. And even if you do encounter such a person, their advice may not be very accurate.
This is why some new online traders and even some experienced ones like to “buy the basket” when investing. This is a strategy where you invest in a group of securities all at once. Obviously, not all of these are going to be profitable. But this investment strategy may generate enough profit to protect you against the losses while also giving you a better idea of each investment’s future potential.
5. Develop a trading strategy
The best online traders don’t simply go in blind. Instead, they have trading strategies that define how they approach buying stock. And if you want to be successful, you’ll need to develop strategies of your own.
There are many different strategies you can use, including a price action trading strategy and advanced techniques such as harmonic trading. But what all these strategies have in common is that they help you go into trades with a risk management plan. This helps ensure you don’t end up losing all of your money due to taking too many unnecessary risks.
But it may be difficult to master trading strategies without help. This is why taking online courses or finding a mentor is so important.
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6. Set goals for yourself
It’s true that certain elements of online trading involve taking risks and trusting your instincts. But for your day-to-day trading to be successful, you need to set certain goals to govern your behavior.
For example, you might have basic goals including earning a certain amount by the end of the year. But you can also set smaller goals, including making a certain number of trades per day and depositing a certain amount of money into your trading account each month.
Sticking with these goals will help you develop trading discipline and also make it much easier for you to chart your growth as an online trader.
7. Treat everything as a lesson
One bit of advice we have to offer may sound more like a Jedi training tip than a stock tip. But here it goes: you need to treat everything as a lesson.
Basically, failure is inevitable. You will eventually face some losses, and some of them may be deep and heartbreaking. But the most important thing is to go back and figure out what caused the market fluctuations you were not expecting.
Everything from political decisions to corporate news to COVID-19 developments can affect the market. But if you study the daily market fluctuations and learn from your failures, you can make more accurate predictions for future trades.
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8. Have patience
One of the best tips we can offer is really quite simple. And here it is: to be a successful trader, you need to develop a true sense of patience.
Patience will help you in the first couple of years as you learn the rules (both written and unwritten) governing stock values and trading strategies. And patience will also help you not sell a stock prematurely before it reaches its full value potential.
If you are already very patient, then you are effectively at an advantage when you get started. But if you’re not, keep in mind that developing a keen sense of patience and trading discipline may be one of the hardest parts of online trading!