If you’re interested in the financial markets, you may be wondering how you can get started. Do you have to be a Wall Street whiz to get involved? Or are there easier ways to get started? The truth is that being a trader in the stock market is easier than you think. Just follow these tips to get started.
What is Stock Trading?
A trader is usually referred to as someone who sells or buys stocks daily for several companies, especially those experiencing growth. However, there are also many traders; short-term traders hardly ever sit on one stock and want to profit almost every hour.
However, if you plan to save some profit for retirement, it is better to become a long-term trader through long-term investment.
Different Ways of Stock Trading
There are different types of trading, and they are based on trends, frequencies, selling, and purchasing activities.
Active Trading
Some traders have a passive approach, as they trade once and then forget about it; these traders cannot be considered active. However, when a trader is actively involved in the stock market or is at least taking part in ten traders every thirty days, he is actively watching the market.
To take advantage of short-term profits, active trading is important, and it also requires you to assess the market conditions regularly.
Sometimes you may get a tip that a company’s stock is currently fluctuating but is expected to rise in the future. If you have followed this company’s trend, you will not hesitate to purchase the stock and watch its value rise.
Day Trading
Traders who like to trade aggressively and constantly buy or sell different stocks are making huge profits every day. This approach differs from the active trading approach; while you might be selling or buying the same stock as active traders, you are making more profit daily.
Usually, day trading requires complex tools and technologies, and there are several trading software available in the market. Day traders don’t care about the companies they are investing in as long as they profit at the end of the day.
The goal of the day traders is to find suitable and reliable day trading platforms that have the best brokers so that they make more money hourly and daily.
24/7 trading vs. Business Hours Trading
Traditionally, the stock market has operated during business hours. For example, Wall Street in New York City is open five days a week (Mon-Fri), and the activity in the market kickoffs at 9:30 Am (ET) and ends at 4.30 pm (ET). No trading takes place during the weekends or on holidays; however, trading after hours is allowed in rare cases.
This means that traders need to be careful when they lock in the last trade of the week and come Monday morning, everything can change. Therefore, stock traders need to understand when to sell stocks and consider several factors, especially the operating hours of the market.
Tips for becoming a Stock Trader
If you are considering becoming a trader in the stock market, you should know the market and how it operates. The most important ability that traders should have is to turn their client’s return into a profit. To obtain a license, you will need to pass an exam and sell stocks for your clients.
To begin your career as a stock trader, follow these crucial steps:
- Earn a suitable degree
- Do an internship
- Decide what you want to do
- Take the necessary exams
- Make a CV
- Search for open positions
- Make interview preparations
- Gain experience as a trader and acquire the licenses
Earn a Suitable Degree
Earning a suitable degree in accounting or finance can give me the necessary skills to become a trader in the stock market. Some companies might even offer you training programs to teach you the basics of selling and buying in the stock market.
Do an Internship
If you are a college student and aspire to become a trader in the future, then participate in an internship in the stock exchange. This will be a learning experience, and you will know what the market requires of you. The internship will also give you a clear insight into how fast-paced the stock market is and how rapidly it changes.
Decide what you want to do.
The stock market is incredibly diverse, and there are several jobs within the market that you can apply for. Choose the path that is best for you, assess the pros and cons.
Take the Necessary Exams
You will need to complete several licenses and exam requirements to become a trader in the stock market. Some of those licenses and exams are:
- Serial 7 General Security Sales License: This license allows the trader to sell all types of securities.
- Series 3 Exams: Allows traders to trade futures contracts on commodities.
- Series 63 License: Ensure that the license holder is aware of the state laws about securities.
- Series 8 License: Gives stock traders the authority to manage and supervise brand activities.
Make a CV
Create a CV that is attractive and will help you apply for positions in the stock market. The CV should be concise, clear, and it should highlight all your skills and levels of education. You should also create a personalized cover letter before you apply for the stock exchange. The cover letter will give the employer a more thorough understanding of your skills.
Search for Openings in the Stock Market
Start the search for stock market openings on online job boards; this will help you refine your search. This step will also give you effective career guidance and advice. Other sources for a job opening are friends, family members, and newspapers. Once you find an opening in the market, apply immediately.
Make Preparations for the Interview
When an employer feels that your experience and skill match the requirements, they will call you up for an interview. Ensure that you do thorough research on the business and its environment to better prepare for the interview.
Once your interview is over, write the interviewer a thank you note to show how grateful you were for the opportunity.
Gain experience as a Trader and acquire Licenses
To take advantage of all the lifelong lessons to maximize your personal growth. If your employer recommends extra learning and training courses, take them, and they will keep you up to date with the latest trends. These courses will also help you build confidence and trust in your abilities as a trader.
How Much do Traders in the Stock Market earn on Average?
On average, traders in the stock market earn roughly 66,090 dollars annually; however, there are few certainties in the stock market. Usually, the figure fluctuates within this range: 28,000 to 210,000 dollars. The amount you earn depends on your abilities and skill set. The market you trade-in and where it is located will also influence your salary.
Traits for becoming a Trader in the Stock Market?
If you want to trade in the stock market, then you should have the ability to adapt. The traders need to get used to the ever-changing landscape and environment of the stock market.
Secondly, when conditions in the market change, traders should manage pressure and stay calm. Traders should also have the ability to act as fast as possible and learn the art of making decisions abruptly.
Is there a Demand for Traders in the Stock Market?
There is always a certain demand for traders in the stock market, especially as long there is an investment in the market.
What is Forex Trading?
Forex trading is when a trader buys a currency and sells a different one, and the exchange range fluctuates according to the demand and supply. The trade for currencies takes place in the foreign exchange market that is open from Monday to Friday.
The Foreign exchange market is open 24 hours a day. All currencies are traded over the counter (OTC), which means there are no physical exchanges, and a worldwide network of financial institutions and banks oversee the operations. As a result, the vast majority of trading in the market is between institutional traders.
Stock Trading vs. Forex Trading
The traditional trading way is to buy stock in a company, which means you are actually making an investment in that company and eventually become a shareholder. However, traders that work with currencies trade on the Foreign Exchange Market (FOREX), and though both the stock and the Forex market are traded on Wall Street, they are different markets.
Stock Trading
Traders trade in shares, and the liquidity depends on the company you invested in and the specific market. In stock trading, leverage is extremely low.
Foreign Exchange Market (FOREX)
In the FOREX market, you are exchanging your country’s cash for profit. On the other hand, in the Forex market, the liquidity is high and is constantly present. Therefore, the leverage in this market is also high.
Pros and Cons of Stock Trading
Pros
- A wide range of trends to keep an eye on
- Restrictions for short-selling
- Managing risk more important than liquidity
- High leverage is not important
- Trading is done during business hours
Cons
- Stake of ownership in the company
- Risk is high in the market
- Investment is time-consuming
- Emotional roller coaster ride
Pros and Cons of FOREX Trading
Pros
- Only eighteen currency pairings to keep an eye on
- No restrictions on short-selling
- Liquidity is high
- Leverage is high
- Trading is done five days a week (Mon-Fr), and the market is open 24 hours.
Cons
- Experiences period of high volatility
- Small and independent retail participants face stiff competition.
In addition to the benefits and drawbacks of the two markets, both are also regulated differently. Traders in the stock market need to follow a set of rules and regulations made by the Exchange and Securities.
However, since the Forex market falls under the following category: ‘Commodities and Futures Trading Commission Guidelines,’ its rules and regulations are different. As a result, the difference in leverage in both markets is also huge, and in the Forex market, traders can even gain leverage of 50 to 1.
Even though leverage is high in the Forex market, there is also a lot of risks. For example, when trading stock, the leverage is 2 to 1, which is common amongst most stock brokers. This means that only 50 % of the value of the stock you are trading needs to be available as cash in your trading account.
To decide which market is better, you will need to weigh the pros and cons and analyze the risks.
What is Cryptocurrency Trading?
Today cryptocurrencies have a total market capitalization of 300 billion dollars; they are projected to rise above the ten trillion-dollar mark in the next two decades. There are more than 150 types of cryptocurrencies, and new currencies are being released daily.
Some experts believe that right now, Bitcoin is more valuable than gold. As a result, cryptocurrencies have attracted much attention, and many traders are now involved in the trading. However, there are several differences between cryptocurrency trading and stock trading.
Below we will discuss the details that make all the difference:
Long Term vs. Short Term Payout
It takes a while to get a return on investment in the stock market, and there are other fees, such as paperwork charges and percentages that traders need to pay. However, experts believe that the main issue of the stock exchange is its inaccessibility, and even buying stocks of large companies is a time-consuming process.
When you get through all the hard work, such as meeting the requirements of becoming a trader, selecting the stock, and then purchasing them, you have to play a waiting game by sitting on your investment and waiting for the profits.
The profits are not certain due to changes in trends, fluctuations, recession, and much more. So the investment that you made can also turn into a loss. To get a higher return, traders need to invest a hefty amount.
On the other hand, trading in Cryptocurrency is simpler, you only need to invest $ 50, and there is also no need for paperwork. All you need to do is register an account on the cryptocurrency online exchange and invest in cryptocurrencies with a rising trend.
Almost anyone can trade in cryptocurrencies; however, most working full-time believe that investing in cryptocurrencies is time and energy-consuming.
Another drawback of Crypto trading is that the market has high volatility, which means you can stay low by making a low investment before any substantial movement. Still, when there is movement, your returns will skyrocket.
Conclusion
This article has discussed all the aspects of the stock market and how you can become a trader in the stock market. In addition, we have mentioned several tips in this article to help beginners transition from their education into the stock market. We have also made several comparisons in this article, such as FOREX vs. the Stock Market and Stock Market vs. the Cryptocurrencies trade.
Once you read all the information in this article, you will get clarity, and making a decision will become easier. As always, weigh the pros and cons, assess the requirements, and then decide what you have to do.