Stocks are a popular investment tool that can magnify your profits to a greater extent. You can gain by investing in stocks and owning them when the stock price surges. The other way to gain from these popular tools is by quarterly dividend payment. Investment here gatherers over an interval and eventually generates good returns due to compound interest.

How to begin stock investing

To start investing in stocks, you need to follow a few steps and keep certain points in mind. 

1) Find your investing approach 

The very first factor you should consider while investing in stocks is finding your approach. It will help if you calculate how much time you can spend in trading. It means that if you are in a private job where you hardly get a few minutes in between to check the market price and shifts, then day trading is of course not suitable for you. But, if you own a business and have the entire day to monitor the market events and shifts, then day trading is a perfect way to start investing in stocks. 

It is just an example; there are various other techniques and approaches in the financial market. Choosing among them depends on your suitability considering time, holding period, and the way you wish to trade. 

1) Day trading 

It is one of the popular active trading styles. It is generally regarded as the pseudonym for active trading. Here, traders sell and buy assets within the same trading day. The positions are not held overnight. 

2) Position trading:

Many traders regard position trading as buy and hold technique rather than active trading. But, it is also somewhat active trading when performed by experienced traders. This type of trading generally last several days to several weeks and is done by examining long-term charts. 

3) Swing trading 

Swing trading is generally done by selling and buying assets as the price volatility sets in. They play their game as the trend breaks. Swing traders typically hold their trading position for more than one day, and their trading decisions lie on technical and fundamental analysis. 

Choose the stock you wish to trade

There are several factors you should keep in mind before choosing the right stock for you. 

1) Invest in those companies which you understand better 

2) Diversify your portfolio to mitigate risk 

3) Always try to avoid penny shares 

4) Try to avoid high-volatility stocks till you get the essence of the stock market and its fundamentals 

5) Learn the basic concepts and metrics for evaluating the performance of various companies and their shares 

The two main categories of stocks to choose from are: 

1) Common stock 

If you are a novice in the stock market and wish to purchase a few shares, you can go with common stock. As the name implies, it is the most common type of stock. When you undertake these shares, you own a share in the firm's returns, and you get the right to vote and may also earn dividends. 

2) Preferred stock 

The other broad category in stocks is the preferred stock which is usually compared to bonds. This type of stock usually pays the trader a set or fixed dividend. As the name implies the shareholder of preferred stock also receives preferential treatment. The firm's dividend is paid to preferred stockholders before common stockholders, including in the case of liquidation or bankruptcy. 

3) Open an online trading account 

After you have decided on the strategy, plan, and stocks you wish to trade, the next step is opening an online trading account for investing in stocks. The financial service provider provides various types of online trading accounts to its users. You can opt for which suits you best. 

1) Retail trading account: The retail trading account deals with trading commodities, cryptocurrencies, forex pairs, stocks, and precious metals such as silver, platinum, and gold. The swaps are high for these accounts, but the broker provides certain discounts. This account is

3) Islamic trading account: This account is specially designed for Muslim traders. The entire account is based on Sharia law. 

4) Demo trading account: It is suitable for beginners. It allows the novice to practice trading, strategies, and risk management before entering into real-world trading. 

One of the legitimate firms offering all these account types at affordable rates is ROinvesting. It is a well-regulated firm offering services at just $250. The broker also provides free demo or virtual trading accounts for beginners. 
 

The Bottom Line

Understanding the concept of investing in stocks is a time-consuming task but can enhance your profit once appropriately done. Read articles and courses from authentic sources to build robust knowledge and diversity in your portfolio to mitigate the chance of risk. Moreover, keep financial goals and risk tolerance in your mind before starting. You can avail of educational courses offered by InvestFW.