For most people, working from home is the ultimate professional dream: no commute, no annoying co-workers to deal with and the ability to set hours that fit around your personal schedule. However, not all companies offer you this opportunity, which is why if you have the dream of learning how to make money at home, you may consider stock trading as an option. At home stock trading allows you the full flexibility of at-home work: you pick the hours you work, you are in charge of how much money you make, and best of all, a large percentage of your time is spent monitoring the markets making sure that your money is working for you.
Investing vs Trading
One of the biggest misconceptions that wannabe stock traders make is confusing the concepts of investment and stock trading. Many people hold investment portfolios as part of a retirement plan, but this is not the same as trying to make money on the stock market. Investments tend to be larger purchases made in stocks that are seen as non-volatile; that is, their price will generally increase over time giving you a solid return on your money. It’s a passive activity where you put money into the market and leave it alone for a while.
Trading, on the other hand, is much more interactive. While you can take long positions (trades where you hold the stocks for a number of days or weeks), most people learning how to make money trading stocks will start with day trades, where you buy and sell shares in the same market day. While the profit margins on each trade are smaller, you’ll make many more trades than through a traditional investment model which means with a solid strategy and a bit of luck you’ll start to see immediate gains. You will need to be ready to devote large chunks of time to watching the stock market for patterns and signals of price fluctuations, and signing up for an online school of trading will help you get the basic skills mastered before you get started.
How to Pick Stocks
The most important thing to remember when you’re starting out learning how to make money in the stock market is that it is enormous, and while the news will report on the overall value of the major stock exchanges, this actually represents the average rise and fall of thousands of stock prices over the course of the day. Learning some simple stock picking strategies will help you find the corner of the market where you can find your niche and make some money from trading:
- Build a diverse portfolio – the golden rule for all new stock traders is to avoid putting all your eggs in one basket when you are starting out. The reasons for this are obvious: if all your stocks are in one sector and that sector suffers a market crash, you will lose money on all of your trades. Many new investors will find a few sectors that represent stability and low-growth, such as utilities, to build their cash reserves, and then buy a few stocks in a more volatile market to make larger profits.
- Look for companies with surplus cash – before you even sign up with an online stock broker, you should begin doing deep dive research on the companies that you’ve identified as being possible trading opportunities. Each company will produce an annual report showing their profits and balance sheets, and you’ll always find better stock prices and less volatility in organizations that have a healthy cash reserve. This is because they are deemed to be in a safer position against a market crash or recession than a company that is up to its neck in debt.
- Use what you know – trying to work out the best sectors for making money on the stock market takes a lot of time and experience. To start your portfolio and make good choices from the thousands of options out there, you should choose areas that you are knowledgeable about. This insider information will mean that you already know some of the big players, and you know where and how to find the latest news that may affect the stock prices of companies in that sector.
Once you’ve identified your potential markets, you should begin looking for value investing opportunities. This is where you find stocks that are currently undervalued compared to their historic market price and buy them at the “discount” price and wait for the price to return to normal. By getting access to a large database of historical market data such as mystockodds.com, you can learn to identify those underperforming stocks before you start your stock trading adventure.
What’s Your Goal?
When you decide to work from home and learn how to make money trading stocks, you need to think about what your overall goal will be. Most new investors fall into one of three categories:
- Income-oriented – these type of investors look to make a small amount of money on a regular basis. They seek out solid but low-growth companies and hold stocks for a longer period of time. This is best if you’re looking for a low time investment with not much in the way of risk.
- Wealth preservation – these types of stock traders look for blue-chip companies (large companies with an excellent reputation) that will do well in any kind of market. These tend to be technological companies or those that act as an umbrella organization for a number of smaller diver companies. This is a low risk strategy best suited for those with small amounts of starting capital who are looking to build reserves slowly and steadily.
- Capital appreciation – these types of traders look for big wins from companies that are in their best growth years. They tend to have a large starting capital and can afford a few losses in among in the bigger gains. It’s a higher risk strategy but one that can pay big rewards.
Of course, you can have elements of all three goals. You can set up in a few wealth preservation markets to maintain and grow your capital reserves, and trade a small percentage in capital appreciation strategies to try and score some bigger profits. In any case the best rule is to make a trading strategy and stick to it.