Stock trading is when traders buy and sell stocks or shares of ownership in a public company. When you buy a stock, you become a partial owner of that company. You can then sell your shares back to the market or hold onto them in the hopes that the value will go up so you can profit when you sell.
The two primary types of stock trading are buying and holding, and day trading.
Buying and holding is when you buy stocks and hold onto them for an extended period, typically years. This strategy is more about investing in a company for the long term rather than trying to make quick profits.
Day trading is when you trade within the same day, which is a more theoretical approach, and you will need to monitor the market closely to make successful trades.
Before you start trading stocks, there are a few things you need to know.
Know the different types of stocks
The two central stocks are common stock and preferred stock. Common stock is what most think of when they think of stocks. It represents ownership in a company and entitles the shareholder to vote on corporate matters and receive dividends. Preferred stock is a type of stock that has preference over common stock in terms of dividends and voting rights but typically doesn’t have as much upside potential.
Understand how stocks are traded
You can trade stocks on exchanges, where buyers and sellers come together to buy and sell stocks. The most well-known stock exchange in the Netherlands is the Amsterdam Stock Exchange; others include the New York Stock Exchange and the Nasdaq.
Choose a broker
To trade stocks, you will need to choose a broker. A broker buys and sells securities on behalf of their clients. There are many different types of brokers, so it’s essential to choose one that best suits your needs. Traders in the Netherlands can visit Saxo NL for more information.
Research companies before you buy
It’s important to research a company before you buy its stock. You can start by reading financial reports, reading news articles, and looking at analyst ratings.
Know the risks
Investing in stocks is risky, and you can lose money if the stock price decreases. However, there’s also the potential to make money if the stock price increases.
Decide what type of trader you want to be
Are you looking to hold onto stocks long-term, or do you want to day trade? Each approach has risks and rewards, so it’s important to know what you’re getting into before you start trading.
When starting, it’s a good idea to start with a small amount of money. It will help you familiarise yourself with the market and how it works before you risk more money.
Have a plan
Having a plan when trading stocks is essential, which means knowing your goals and how you will achieve them. For example, are you looking to make a quick profit, or do you want to invest for the long term?
Changes in the stock market can happen slowly, so it’s essential to be patient when trading stocks. Don’t expect to make a lot of money overnight – it takes time to learn how the market works and to find successful strategies.
Stick to your plan
Once you have a plan, stick to it, which means buying and selling stocks according to your goals, and not letting emotions get in the way.
Review your progress
Periodically review how you’re doing to see if you’re on track to reach your goals. If you’re not, make adjustments to your plan.
Get help from a financial advisor
If you’re unsure where to start or want someone to help you with your investment decisions, consider working with a financial advisor. A financial advisor can help you create a plan and choose the right stocks.