Trading the stock exchange – how to start trading in the stock market10 min read
What trading platforms are used for trading in the stock market? Where to get training in currency trading on the exchange? How to use trading robots for trading on the stock exchange?
USA, 1941 year. Eleven year old teenager, asking for sister money, buys on the stock exchange three shares of Cities Service at 38 dollars and 25 cents each. It takes a few days. Stock price rises to 40$. Young speculator sells securities and earns 5,25$. He is happy, proud of himself: first money earned!
Less than a week needed shares of Cities Service, to fly to the mark 202$. Wait a bit, and the profit would be almost 500$! But the money is lost. The exchange taught its first lesson, which boy will remember for life.
2010 year. The richest man transfers half his fortune – 37 billion. dollars to charity funds. The most generous act of charity in history. An eleven-year-old teenager turned into an already elderly 78-year-old man. Novice investor – in the richest man in the world.
This person’s name is Warren Buffett. Lives in Omaha, in a small house, bought in 1957, drinking coca cola, playing golf with bill gates. And still considered the greatest investor of our time.
What is the stock exchange
Securities sold on a stock exchange — stocks, bonds and other varieties, which I will tell you about below. By «age» this market segment is located in the middle between the commodity and raw materials exchange and the currency market.
The easiest way to identify the features of the stock exchange, if you compare it with the currency.
Securities Market Works not around the clock, no trading at night. On weekends and international holidays, brokers also relax.
Any financial instrument has its own characteristics of price movement. Stocks rise and fall sometimes thousands of dollars a week. And the currency?
So there is no multiple increase in prices in the foreign exchange market and cannot be, but on the stock – you are welcome.
In Forex, a broker must pay a spread to open a transaction – once. When speculating with securities, a commission is paid – and at the opening, and when closing a position.
Have you ever seen a building with the inscription «Forex Exchange»? Not? And you will not see. Because he is not. Forex exists only in the Internet space. But stock exchange is localized – there is «building» in New York, Sydney, Tokyo, Frankfurt and t.d.
To trade securities, need larger capital, than for a successful start in foreign exchange trading. Special, if you go to the US and European stock markets.
Facebook today is trading at 160$, Microsoft – 72$, Twitter – 19,64$. Promotion Berkshire Hathaway – Warren Buffett Company – is worth 256 000$.
We systematize our ideas about the differences between the stock and foreign exchange markets in the table.
Differences between the stock and foreign exchange markets:
|№||Parameter||Stock market||Currency market|
|3||Leverage||Up to 1:1000||Up to 1:3|
|4||Localization||There are exchanges in different cities, online bidding||Not localized, only online trading|
|5||Working hours||Not around the clock||Around the clock|
Let’s take a closer look at stock market tools.
What is traded on the stock exchange — 4 basic tools
Economists classify the financial market differently. Someone selects only the stock segment, someone splits it into the actual stock and urgent.
Speak, that securities are traded on the stock market, – right, but not exactly, for securities are divided into several types. We highlight the main.
Tool 1. Stocks
Typically, trading on stock exchanges refers to speculation in stocks. We give a definition.
Stock – security paper, buying which, investor contributes his share of cash to the total capital of the company. Stock entitles the investor to receive part of the profit of the joint-stock company, proportionate share of his investment.
The acquisition of shares allows the investor to influence the development of the company, voting on the board of directors. The strength of the investor’s voice is proportional to the share of his investments in the total capital of the company.
Stocks are highly volatile instruments, because they can change dramatically in a short time. Example – the Cities Service promotion mentioned at the beginning of the article, purchased by Warren Buffett.
Part of the company’s profit, received by the shareholder, called a dividend. After paying dividends, the stock usually loses in value.
Previously, the loss in value due to the payment of dividends was clearly traced on the charts – large drop in prices or even price gap. However, today stock price fluctuations during the day are several times higher than dividends, therefore, the loss in value is negligible.
Tool 2. Bonds
Bonds are less popular as a means of increasing capital. They are often used as safe investment option with minimal risk.
Bond – this is a security, obliging one of the parties to give the other party a certain amount of money, previously borrowed, with a percentage.
If we buy a stock, we don’t know, to what value will its price rise, but if fundamental and technical analysis portends growth, mean, there is a prospect of making good money.
When buying a bond, the maximum possible profit is known in advance. No one likes high interest loans, therefore, the profit is usually small.
However, price fluctuations are also characteristic of bonds. Default in the country, bankruptcy of the company or other negative situations cast doubt on the solvency of the debtor.
is he, most likely, money back, but with a delay. How long will the delay last – is unknown.
If the lender needs at all costs to get his investment back, easier for him sell a bond for an investment or grab a small portion of interest.
If the seller seems, what «everything is bad, business burned out», the buyer does not necessarily think the same. If the buyer at the expense of insider or other information is confident in the solvency of the debtor – he will buy a bond with pleasure.
Therefore, prices for this financial instrument are fluctuating, albeit in a small. I note again, bond – low volatility tool.
Tool 3. Forwards
Let’s look at an example. I am launching a large-scale production of sweets and I need sugar. Sugar price fluctuates, but you need to prepare a financial plan, determine the price of sweets and t. d. Means, it is necessary to agree with the manufacturer on the supply of sugar at a predetermined price.
Forward – this is a contract, Whereby, one party agrees to deliver to the other party any product at a predetermined price at a certain point in the future.
Forward signed, after a while I get the right amount of sugar, make candy.
At the time of receipt of the goods price, most likely, will change. If sugar, when I’ll receive it, will rise in price, to me nothing prevents it from selling and earning. However, received goods are rarely resold, otherwise the business will stop.
Tool 4. Futures
Futures are deliverable and settlement, i.e. non-deliverable. On the exchange they trade precisely settlement. The bottom line is, that the real delivery of something is not happening.
If I buy a forward and forget to sell it – will have to cram tons of sugar into the apartment. If I do not sell futures – nothing will happen.
On the exchange, the broker will calculate the difference between the price of the goods, specified in futures, and its market value at maturity. I will either earn, either lose money.
I.e futures just allows you to make money on price changes. Such a transaction is executed only for speculative purposes.
Speculators calmly trade futures contracts and earn, and forwards – this is the path of large firms, operating with real deliveries of certain goods.
Futures are drawn on many instruments. In addition to raw materials, securities trading, currency, indices and t. d.
How to start trading on the stock exchange — step-by-step instructions for beginners
Starting to trade anywhere is easy. It’s hard to get a stable profit. I recommend that you deal with the securities market only if, if you are planning devote all his life to trading.
Installation «I will come, I will earn, go away» will not lead to anything. You drain your money, fill up with negative reviews of brokers. And waste time.
Step 1. We study the stock exchange
It all starts with basic training. Master the trading terminal, find out in detail about different types of financial instruments. Further go into details.
A lot of tools, for the same stocks and bonds fall into a great many varieties. Factors, affecting their value – much more. This again confirms the pernicious hopes of a quick enrichment.
Good, each of us has unlimited access to information.
You will succeed on the stock exchange, if you start with simple training
Step 2. Choose a broker
Partially already wrote about the choice of an intermediary above. There are many brokers, therefore do not entrust the money to the first comer, rigorous selection. Evaluate trading conditions, educational programs, support service work.
Promotions from good brokers need to be worked out – enter into transactions for the amount, ten times the bonus amount.
Step 3. Open an account
When a broker is selected – register, open a trading or training account. Read the terms of trade carefully. Pay particular attention to negative balance protection.
When trading with leverage, nothing prevents the trader from going into minus. Overloaded deposit, didn’t close deals in the evening, and at night, when the stock market is down, news event led to a sharp jump in prices. Result – on the account minus.
Securities market offers speculators leverage 1:3, while in Forex, the size of the shoulder sometimes reaches 1:500 or even 1:1000. But there is still a risk.
If I lose more money, than invested, I am not obligated to indemnify the broker — by those rules, which are relevant now, while writing an article.
Step 4. We determine the trading platform
If on Forex MetaTrader of the fourth version almost always acts as a platform, then in the stock market for software a wide range. Many brokers create their own trading terminals.
Evaluate the pros and cons of the trading platform using a demo account and do not open transactions for real money, until you are fully comfortable with the functionality.
Step 5. Choosing a trading strategy
In the article «Online trading» I briefly characterized technical and fundamental analysis. If you choose technical analytics, it will be necessary to determine its subspecies, because there are indicators, patterns, candles, waves and stuff.
Any trading system should answer three questions:
- Where to enter the market?
- Where to get out of the market?
- What to do, if the idea didn’t work?
Step 6. Bidding
When did the basic training go?, and one deposit after another no longer merges on the demo account, but there is a stable profit, time to go live trading.
Deposit amount of money, which you are not afraid to lose. But remember, that too small deposits in online trading – obstacle for money management.
The risk in the transaction should not exceed 2% of total capital. If the amount in the account is small, will have to give up many potentially profitable deals.
How to profitably trade on the stock exchange
Which recommendations should be followed, to be in profit? Beyond Traditional Type Tips «Do not trade against the trend!» a number of others stand out.
Take note of them, so that squeeze maximum profit out of the market.
Tip 1. Use trading robots
I draw your attention to this recommendation. I do not urge you to buy programs, promising automatic earnings. You must decide on a trading system, work it out, and then automate.
That is, create your own robot. Or purchase a ready-made, if you fully understand, on the basis of what he makes decisions.
Why is your own robot important? Because the developer knows, when to turn it on and when to turn it off. Do not know how to stop super-quality trading machines – merge, no matter how much they cost.
Tip 2. Use the services of experienced stock market managers
If there is money, and the trading skill has not yet been formed – use the service of PAMM accounts, transfer money to experienced managers.
A competent approach to the choice of a trader and elementary diversification will ensure high profitability and reliability of investments.
Tip 3. Always learn to trade
Practice – this is also training. therefore You will be trained constantly. Trade, watch price trends, compare sharp fluctuations with the influence of fundamental factors – comprehend the complex science of stock market play.
Don’t blindly trust TV analysts, but listen and know, what is being said in the market, need.
Tip 4. Trade only free funds
You can not borrow money for speculation. Even if you’re seasoned and super-lucky. The market sometimes surprises and once every 5-10 years they are very, very serious – people not only lose money, but also remain debtors.
Tip 5. Keep your emotions in check
At first it will be difficult to cope with feelings, but gradually cold reason will prevail. Self-control is good for medium-term trading, therefore, do not go to the game at small time intervals from the first days of trading.