Though everyone wants to be the next person to win big with a lucky stock trade, if your primary goal is to make a quick buck, you might walk away from the market a little poorer and a lot wiser, having never reached your full potential.

Trading is immensely exciting, allowing you to take control of your finances while turning a profit from the markets, but that doesn’t mean it is easy.

TRADING EXPLAINED

Different from investing, trading prioritizes short-term profits over long-term gains and involves buying and selling shares in companies to make money in daily price changes.

While there’s no right or wrong way to trade, you’ll have to decide what kind of trader you would like to be.

Most investors who try their hand at stock trading for the first time are best suited to keep things simple with a long-term outlook.

Trading involves much shorter time spans, ranging from less than a day to a few months while investing generally means buy and hold with the number of trades much lower than in trading.

To manage a few risks of trading, you may want to consider the following:

1.  Assess your budget

While the stock market almost certainly rises over time, there’s too much volatility in the short term. Thus, money that you might need within the next five years shouldn’t be invested in the stock market.

For example, if you want to day trade U.S. stocks, you would have to maintain a balance of at least $25,000 in your account.

On the other hand, swing trading has a longer-term approach and doesn’t have a minimum capital requirement.

However, you may want to commit to at least $10,000 to trade stocks of varying prices as new opportunities become available.

2.  Find a reliable broker

A broker serves as an intermediary between market participants, allowing you to buy stocks from sellers and sell stock to buyers.

As a trader, you’d ideally want a broker that offers low trading fees, is reliable and honest, and has useful research tools committed to educating and supporting you through each step of the trading process.

All brokers offer a trading platform with technology that allows you to view stock quotes, see charts, do research, and place orders.   If you’re a beginner, find a broker that has an easy-to-use trading platform that is less advanced.

3. Open an account

To start your trading journey, you can open an account with an online broker within minutes.

After you have educated yourself on the financial markets and built strategies based on your observations of price actions and charts, you can try out a free demo or paper trading account to put everything you have learned into action.

Practising on a demo account is a great way to gain confidence in the markets and see which of your trading strategies work or don’t work without the fear of losing any money.

CONCLUSION

To master the basic skills needed for trading, one needs to take adequate time to learn and understand the market to increase the odds of success.

So, if you’re planning on managing your investments and making your own trading decisions, you should learn how stock prices are set and understand basic principles like stock quotes, bid & ask prices, and stock orders.