Tips for Getting Started in Trading

Buying and selling commodities, stocks and bonds is easier than it has ever been for anyone to get into. To some degree, the internet has leveled what was once a much more uneven playing field. However, there is still a big learning curve if you are just starting out. Below are a few tips and concepts that will help.

Day Trading

The first thing to ask yourself before you get into day trading is how much you have to spend. If it is a lot, as in around $25,000 or more, you have your pick of stocks, futures or the foreign exchange market. If you don't have that much but you do have at least $1,000, you can still get into futures or foreign exchange. Finally, if you have under $1,000, foreign exchange is still open to you, and this is the case even if you just have $100 or even $50.

You'll need a reliable computer and internet connect in order to day trade successfully. You can download a few different platforms and experiment to figure out which you like best. You'll also need a broker. You should look for a low-commission broker, but be sure that you don't skimp so much that you do not get the services that you need. These are just the day trading basics. While you should do your research, part of learning enough about day trading to be successful at it is simply jumping in and doing it. Start with just one market and one type of strategy rather than trying to do everything at once.

Shorting Stocks

If you're like most people, you've probably heard of shorting stocks, but you don't really know what it means. Another name for it is short selling, and it basically means selling stock that you don't own, often stock that a broker loaned you, as you can see from this video here. The reason you'd do this is because you think the stock price is about to plunge, and you want to sell it now and buy it back later for less. Of course, this is a gamble. Since the stock is not yours, you're obligated to buy it back no matter what it does, so if the price increases, you could be out some money. Basically, you shouldn't get into shorting stocks if you can't afford to lose.

Stonks

If you've just started looking around at the trading world, you might have run across the word stonks and wondered it means. What are these stonks and why do people seem to use it in interchangeably with stocks? Your confusion is understandable, because stonks is silly internet slang for stocks. It's been around for a few years, but it really took off in early 2021, when one of the big stories in the stock market was a group of investors getting together to drive up the value of GameStop stocks after a hedge fund attempted a short sell. While this incident brought both the idea of short selling and the easy access you have to the stock market using apps into the public consciousness, the best lesson to learn from it is that most of the time, it's not a great idea to get too caught up in investment fads.

Forex Trading

Have you encountered the word forex and wondered what it means? This simply refers to foreign exchange. This is a great market to get started in if you only want to spend a little money, but there are some basics you should be familiar with.

First, you need to understand the concept of currency pairs. The value of a currency is always relative to another currency, so trading is always in pairs. You should learn the common abbreviations, such as JPY meaning Japanese yen, EUR meaning the euro and AUD meaning the Australian dollar. You also need to know the term pip. This stands for point in percentage and refers to the second decimal place in the yen and the fourth decimal place when you are talking about any other currency. You'll hear people saying things like a 100-pip profit.

Practicing

Keep in mind that you can get started teaching yourself about the markets without spending any money at all. You can use an online simulator to help you practice. Some online brokerage apps offer what is known as a paper trading account, which means that you are not spending any real money. While you might find these exercises frustrating if you make good fake trades and have no money to show for it, it's a good way to check whether you are ready to enter the trading world.