Stock Market

How to Make Money in Stocks: 6 Solid Basics

How to Make Money in Stocks
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Everyone you know now has a piece of advice or two about how they have gleaned the miracle money off the various trading portals with more than 10 million new trading accounts opened during the pandemic year of 2020. T

en million new traders with cash to dole out into the momentum of stocks and shares spree. The stock market, as speculative as it is, is a better strategy to grow wealth than playing the lottery of doing nothing.

People win the lottery but the odds are stacked heavily against you, unlike the Stock market where you gain education as you dive deeper into it.

Looking on how to make money in stocks? Here are five basic things you need to understand.

Investor vs. Day trader

If you joined the bandwagon of owning shares during the pandemic, you are more than likely a trader rather than an investor.

A day trader is a short -term buyer/seller of stocks with speculation for short-term movement to secure a profit.

An investor, on the other hand, puts money in companies they believe in its prospect and hold such securities for a long time to make capital gains

Follow the market news

There is a ton of free information that only takes a couple of hours to research and cherry-pick what company is likely to have an upward or downward swing and make your trade.

For example, when Moderna had its trial version on the table for its covid vaccine approval, it was an indication that, upon approval, there’d be a surge in share price.

The gamble is to purchase before the approval and sell immediately share price surges. If it doesn’t get approved, you keep the shares until it is approved.

Follow the ‘consensus’ news

Every company declares its results every quarter to the public. The result can either beat or miss consensus.

So, if finance commentaries are speculating a company of interest will outperform expectations in its upcoming results, you may want to purchase shares before results are released.

Take note that release dates can be confusing to non-savvy traders. For example, if results are to be announced on November 8th, it could be before the market opens, which means your best entry point will be before the market closes on the previous trading day.

Get top commentaries for free on apps

Yahoo Finance, MSN Money, and Google Finance are examples of a website that provides free but vital content on the stock market and would supply consolidated information and granular details as much as you are interested. 

It becomes easier to make a buy/sell decision from these apps, but it doesn’t remove that element of gambling inherent in day trading.

Start your journey with a dummy account

It’s time to put a spanner in your spokes. You need to learn with a dummy account first and get comfortable with trading otherwise; you’d see a big black hole in your bank account.

You are a rookie, and it is only wise not to start with your hard-earned money. Almost every primary trading account starts you with a dummy account to simulate your trading experience to buy you that experience.

Colour code Green for Greed

Do NOT get greedy. It is unlikely going to have a happy ending. Set a low target to cover your trading fee, cost of buying, and a little profit.

Learn to tap out even if the momentum continues to mount up. You are not an expert and should check out your gains early by exiting your positions.

You are not an investment banker and don’t know as much.

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About John Adebisi

John Adebisi is a CPA, FCCA and MBA holder with a Bachelor's degree in Accounting & Finance. He has over a decade of experience in writing personal and business finance content for audiences across North America, Europe, the UK and Africa. In addition to his writing experience, he also has a strong background in financial research and analysis, giving him a unique perspective of the financial markets. John derives pleasure in helping people make smart financial decisions, and he believes that knowledge and experience can be valuable resources for anyone who wants to learn how to manage their money.

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