How to Trade on the Stock Market

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Trading on the stock market can seem incredibly daunting if you’re a beginner. Many people hear about stocks online and on TV, but few know where to start. There are a lot of different terms and concepts to understand, and it’s easy to get overwhelmed. 

While it’s possible to make money in stocks without fully understanding the market, the more you know, the better chance of success you’ll have. If you want to make money in the long term, you’ll need to know what you’re doing. Remember that trading stocks come with inherent risks, as you can lose money just as easily as you can make it.

Stock Trading Terms

Here are a few commonly used stock trading terms to help you understand the market a bit better.

Algorithmic Trading

Algorithmic trading uses computer software and pre-programmed trading algorithms to complete trades. These algorithms take factors such as time, price and volume into consideration and execute trades automatically to save time and costs. You can learn more about this type of trading with an algorithmic trading programme.

Exchange

This is a platform where you can buy and sell stocks. Examples include the London Stock Exchange and the New York Stock Exchange. You can also use online exchanges or over-the-counter exchanges, all of which offer their own advantages and disadvantages and have different stocks available.

Bull/Bear Market

The market is normally described as either a bull or a bear market. The bear market is characterised by a major stock or index falling 20% or more from its recent highs. A bull market is the opposite, where an index or stock is up at least 20% from recent lows. You can also describe sentiment about a particular stock being bullish or bearish.

Day Trading

This type of trading strategy involves the trader aiming to buy and sell a stock on the same day. Day trading comes with many risks, and it’s not easy. It takes a lot of experience and practice to get good enough to know when to buy and when to sell.

Long/Short

Going long on a position means you have bought a stock and are holding it. You’re hoping that the stock increases in value to improve your profit. On the other hand, shorting a stock is the sale of a stock you don’t own. You borrow against the stock, hoping it will go down in value, therefore increasing your profit.

How to Get Started Trading

Getting started with trading on the stock market begins with choosing the right broker. Depending on where you live, you’ll have a variety of different options available to you. Most brokers are now available online, and there are even stock broker apps you can use. Ensure that whichever service you choose is well trusted and easy to use. Consider opening a demo account first, which will let you trade with pretend money just to practice.

After opening up a trading account, you might be itching to buy your first stock and make your first trade. However, it’s important that you do enough research first. You may know a few things about the stock market already but getting a comprehensive education in the market is important if you want the best chance of success. You can find lots of resources and guides online, and there are also lots of books on the stock market too.

Your next step is in learning how to analyse the market and predict price movements. This is the most important skill in stock trading, as it will give you an edge and help you make the right decisions. Learn about technical analysis and how the price charts can give you clues about the way the market will move next.