Stock Trading for Beginners: Easy Steps to Start Building Wealth (Part 2)

We are going to complete the steps on how beginners can invest in the stock market. If you haven't read Part 1, please start with it and continue with us.

In Part 1, we introduced the stock market and discussed the first step for beginners to enter the stock market. Now, let's continue with the next steps.

Second Step: Select The Amount You Wish To Invest

It's important to avoid investing certain funds in the stock market, such as:

• Your emergency reserve savings, which should typically cover at least 6 months of your income.
• Money allocated for tuition fees or your children's education.
• Money meant for paying instalments or clearing debts.

So, What Money Can You Invest, And How Much Is It Worth?

Simply put, it's the amount of money that you won't need for the next five years, which is called asset allocation. Here's a simple rule to help you decide how much you should invest:

Calculate your age and subtract it from 110. The resulting number is the percentage of your investment funds that should be allocated to the stock market. For example, if you are 30 years old: 110 - 30 = 80. This means that 80% of your investment funds should be used in the stock market.

Of course, you can adjust this ratio based on your risk tolerance. If you prefer less risk, you can reduce this percentage. If you're comfortable with higher risk and don't fear losses, you can increase the percentage to 90% or more.

Third Step: Open A Trading Account

All the previous tips are meaningless unless you have a private investment account that allows you to buy and sell stocks. These accounts are also known as brokerage accounts, and some popular options include XTB, TD Ameritrade, and Avatrade.

You can easily open your own trading account on one of these platforms and fund it with the appropriate amount of money, either through checks or bank transfers.

Before choosing the right brokerage firm for you, there are a few things to consider:

1. Account Type

Select the type of brokerage account you need. The two common types are:

Standard Brokerage Account

This account allows you to trade stocks or ETFs and provides easy access to your money for withdrawals when needed. It's suitable for trading stocks for profits.

Individual Retirement Account (IRA)

This account is ideal for long-term retirement savings. However, it has restrictions on withdrawing money before reaching a certain age.

2. Services And Features Provided

Different brokerage firms offer varying services. Some provide educational tools, investment research, and features tailored to new investors.

Others may allow you to trade in foreign stocks or provide face-to-face financial advice through local offices. It's recommended to look for platforms that offer demo trading to practice before committing financially.

Step Four: Choose Your Shares

Now that you have determined your preferred trading approach and the amount of money you're willing to invest, and chosen a broker platform and created your account, it's time to start buying actual shares and trading.

Here are some important notes and tips to consider

• Diversify your portfolio by buying shares from different companies.
• Avoid highly volatile stocks until you have a good understanding of stock trading and investing.
• Try to avoid cheap small stocks or Penny Stocks, as they have a higher risk of fraud.
• Learn the basic standards and criteria for valuing shares.
• Invest only in businesses that you understand.

Step Five: Keep Investing

This is one of the investment secrets advised by famous investor Warren Buffett. The best way to profit from stock trading is to keep investing smartly. You don't need to make huge investments to achieve amazing results.

Instead, buy shares in large, reliable businesses and hold onto them as long as those businesses remain successful.

Though you may experience some volatility, you will eventually reap rewarding returns on investment. Gain more knowledge about stock trading and learn how to analyze the market and its indicators.

You can explore free online courses or visit the official websites of trusted brokerage platforms, which provide detailed explanations of trading.

You can compare different platforms and decide which one is right for you. Don't hesitate to register on our site to receive new articles and special opportunities.

Written By: Mohammed Mouafak