Things You Should Know Before Trading in the Stock Market

Have you set any financial goals for yourself in the new year?

Many individuals want to get better with their finances and use the New Year as a starting point for setting goals and accomplishing those dreams.

If your money goal happened to be earning more income next year, one option might be to start investing in the stock market. Believe it or not, the stock market, when understood, can generate a lot of income that will continue to work for you if you have a strategy.

Before you go through that door and begin investing, there are some basics you’ll want to know as a newbie.

The Basics

The first thing you should know is the basics of the stock market.

It is made up of exchanges such as NASDAQ and the New York Stock Exchange.

Stocks will be listed under either of the exchanges which is essentially referred to as the market.

The exchanges are also how you’ll learn about supply, demand, and price of the stock you’re trading.

Individual traders are required to trade through a broker, which in modern times has simply become an online account represented by a broker.

Trades are placed through the broker and the broker will then do the transactions on your behalf with the exchange. Trading is done when the exchanges are open which is from 9:30 am to 4 pm Eastern Standard time. It is also good for novice traders to know the stock market holidays 2018 as the trading hours may be subject to change.

Learn the Lingo

One thing you’ll need to learn if you’re going to trade stocks successfully is how to talk like the professionals. Trading without a clear understanding of stock terminology could result in higher risks and fewer rewards.

Some of the most basic terms include buy, sell, bid, and ask, while some of the more difficult terms include beta, ETFs, trading volume, margins, and moving average.

Though you may be working with a broker who does a lot of the work for you, it is still instrumental to understand the terminology when investing in stock.

Importance of Diversification

When investing in stock, it is imperative to diversify your portfolio by investing in various companies or products.

Putting all your eggs in one basket essentially could lead to a total loss over time.

It is imperative to remember that though there can be high rewards, anything could change the tide including poor leadership, regulatory issues, or a health outbreak. By being invested in more than one stock, you can balance out losses easier.

Strategy is Imperative

As trading can often be ruined by emotions of fear, excitement, and greed, having a strategy in place can help to keep you on the straight and narrow.

This includes educating yourself on the current stock market and trends, understanding how much capital you have to trade, setting time out of the day to trade, as well as a plan for minimizing losses.

Stock market trading is often regarded as a surefire way to get rich. The truth is, however, it takes time, skill, education, and in some cases luck to actually be successful.

If you’re thinking of investing in the stock market as a money goal for the New Year, take the time now to get educated on the basics and the above-mentioned tips above. The more informed you are, the better prepared you are to make your money work for you ten times over.