So you’re looking to get into stock trading. Whether you’re trying to make a little money on the side or you just want to better understand the stock market, Active-Investor can help you understand what to expect when you start trading. The first thing you need is capital of course. A lot of people think they can just take a thousand dollars and turn it into ten thousand overnight. Unfortunately that’s not the case. In order to make any kind of money without risking it all at the same time, you need to have at least a couple of thousand dollars to start with. The key to being a successful trader is never risk the majority of your account on a single trade, in fact you should try not to risk more than 10% on a single trade especially if you’re a beginner. You’ll hear a lot of people say that even that is too high. It probably is but if you start with a smaller account you need to be able to put yourself in a position to make more than your commission. Commission is how much the trade costs to execute and is usually around ten dollars or lower a trade and is how E-Trade and Scottrade make their money.
The best brokers for beginner traders are the ones you see on commercials such as E-Trade, Scottrade, and TD Ameritrade. All have commission rates ranging from $7 with Scottrade to $9.99 with E-Trade and all have good 24/7 customer service. As long as you don’t try and trade penny stocks, these brokers will work great for you.
Before you even begin trading you should formulate some kind of strategy when it comes to managing your capital. It’s better to trade safe and secure profits then risk it and lose your whole investment. If you’re just starting out, never risk more than 10% of your account on any trade. That way if the trade goes south on you, you still have money to trade with and recoup those losses. Another thing to watch out for is letting your emotions dictate how you trade. I know that’s easier said then done, but if you start seeing your trade go south and you stay in it thinking it will go back up you can quickly lose your whole investment. It’s better to take the small loss right away then to eventually take a big loss. Remember there will always be other trades to make, you have to make sure you don’t lose all your money before they come.