Are you interested in learning how to begin investing in the stock market? If so, you aren’t alone! Fifty-two percent of adults in the United States invest in stocks.
Buying and selling stocks, bonds, and other investments is a great way to build wealth and save for your retirement, but before you begin investing you need to have an understanding of how it works.
While some people buy stocks and hold them for long periods, others get into and out of stocks by buying and selling them on the same day.
Read on to learn more about what day trading is and a basic guide to stocks.
Day trading involves the buying and selling of a security in the same trading day. The stock market in the United States is generally open for trading from 9:00 am to 4:00 pm EST. The market closes for federal holidays.
After the market opens for the day, there aren’t any breaks. Trading takes place for seven hours each day without interruption. The exception is when something unique happens to pause trading for a short period.
The price of a stock or exchange-traded fund (ETF) can change a lot during the day. This can come about because of breaking world news that changes investor outlook on a stock. It can also be caused by company-specific information becoming public knowledge.
These price changes mean that a stock’s market value can go up and down quite a bit on any given day. Buying and selling to capitalize on these changes can be a great way for you to capture capital gains on your investments.
Before you begin day trading, you should ask why you are investing to begin with.
The simple answer is that you want to make money. Being a good investor means taking a deeper look at the reasons behind your actions.
Some things you should consider are your age, risk tolerance, and financial goals. You also need to have an appreciation for the ups and downs that come with being an investor. In a perfect world, every stock you buy will increase in value from the date of your transaction.
The reality is that spending a lot of time and research before investing doesn’t mean you will receive a positive return. Even the most profitable companies will increase and decrease in value over time. It’s important to not let these up and downs discourage you from investing.
Your risk tolerance is an important aspect of investing that you can’t afford to overlook before you make your first trade. Risk tolerance is a combination of your age, time horizon, and personal preference.
Generally speaking, someone that is 22 years old has a longer time horizon for their investments than someone that is 72 years old.
This can be the result of a combination of different factors.
For example, the younger investor may have a steady job at the time. They may not need their investment income for use now. A retiree might rely on investments for a steady income to maintain their quality of life.
You can also have a better sense of your risk tolerance by considering your personal preference. Are you willing to take more risks for a higher return? Would you rather invest in safer securities that will give you a steady stream of income?
If you are a risk-taker, you may be able to realize a higher return by a combination of timing, education, and some luck. If you are risk-averse, you might be better off buying safer stocks and ETFs. These will help you build wealth at a likely lower rate of return on your money.
After you’ve considered why you are investing and what your risk tolerance level is, you should know when to make your investment.
You should appreciate that you don’t have a crystal ball that tells the future. There’s no way to be certain about the trajectory of a stock or the market. You can’t time the market to know the perfect time to buy and sell.
There are ways for you to make more educated decisions about your investments. These are often based on the timing of your trades and a company’s trading price compared to its true value.
During the COVID-19 global pandemic, big tech stocks have seen significant growth. Companies like Amazon and Facebook have increased their revenues during the pandemic.
One of the reasons is that people are using both companies more during stay-at-home orders. This is a good example of how companies can grow because of current events and changes in the way people live.
One way to take advantage of a buying opportunity is after a company reports its quarterly earnings. Public companies must report their earnings each quarter.
These reports are a good indicator of a company’s current financial health. They also give investors insight into a company’s future challenges and growth opportunities.
Great companies can have disappointing earnings reports from time to time. This may be a short-term setback for a strong company or a sign that its best times are behind it.
Sometimes after a bad earnings report, you can buy shares of a company for less than you could the day before. This can be a good time for you to buy a stock at a little bit of a discount because of the short-term setback of a business.
You can begin day trading by learning the basics about stocks from a reliable source.
At Trade Icon, our Option Pulse is an online trading course designed to help people like you learn about investing and begin to confidently trade stocks in the market. Our program has proven profitable results and provides step-by-step guidance for how to turn a profit in the market within a year or sooner.
Contact us today to learn more about our program and how we can help you take steps towards financial independence!