The stock trading world is fascinating. Over the years, the stock market has created many millionaires, but it has also ruined the lives of countless investors. Today, more and more people are increasingly drawn into the stock market as they look to make a return on their investment.
There are 13.9 million online traders in the world, but it’s difficult to tell how many of these are stock traders. While you can tell the number of shares traded daily, many trades are made by computers, not people. Also, people buy ETFs or mutual funds, which account for thousands of stocks.
In this article, we will explain what stock trading is all about. You will learn how to trade in the stock market and why some traders avoid investing in stocks. You will also get tips on how to be more successful as a stock trader.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
The Rise in Online Stock Trading
With the rise in high-speed internet usage worldwide, online trading is at an all-time high. According to the 2018 Modern Trader report, there were 4.3 Million new online traders in 2017. Besides, the traders were not restricted to financial centers like London, Hong Kong, and New York but were spread out all over the globe.
Online stock trading is particularly popular with millennials due to the increased use of smartphones, low trading fees, and the ability to monitor their trading accounts in real-time, among other advantages.
Reasons Why Some Traders Avoid the Stock Market
Even with the rising trend in online stock trading, many individuals still do not participate in stock trading. Some of the reasons they give for not investing in stocks include:
Lack Of Funds
A lot of people believe that to trade in stocks, you must have lots of money. This is erroneous. However, a recent GOBankingRates poll indicates that only about 10% of the 1000 respondents invest their money in stocks citing lack of funds or fear of losing their money.
The thing is, you don’t need to be rich or have lots of money to invest in stocks. Unfortunately, not having much money to invest in stocks could work against you at times.
You see, when you have little money, you are more attached to it than if you had lots of it, hence, cannot afford losing it. Thus, if a trade veers off the expected path – even slightly-, the fear that you might lose your money results in a rash decision. And most likely, you end up making a loss.
Lack Of Trust
This should not come as a surprise. The internet is rife with stories about scammy brokerage firms, which tend to scare off potential investors. Besides, the belief that the stock market is too risky makes others reluctant to invest their hard-earned cash in the stock market.
What’s more, stock crashes and financial meltdowns such as the 2007-2008 Global Financial Crisis don’t inspire much confidence in the majority of traders. This is because most of them become more wary of the stock market.
Lack Of Information
Anyone can open a brokerage account. Well, so long as you are over 18 years old. But many people do not know this, while others think that having a stock trading account is a preserve of the rich. There are also many individuals who don’t see why they should invest in the stock market.
Lack of knowledge is also the main reason most traders don’t perform well in the stock market. But it doesn’t stop here. Seeking information in the wrong places comes next. And third is wanting to gain knowledge on how to trade in an easy, fast, and effortless manner.
For example, in the survey mentioned earlier, only around 14% of the respondents said they consult a financial advisor when investing in the stock market.
For you to be knowledgeable in matters of trading, you need to learn how to:
- Develop a profitable trading plan
- Analyze stocks to know the best time to buy and sell
- Implement effective controls to minimize your losses and maximize profits, such as a stop-loss
- Add experience to all the above
Unrealistic Expectations About Stock Trading
All worthwhile investments involve an element of risk, and this includes stocks. Yet a majority of traders either act on a whim, depending on luck or plunge head-first into stock trading without taking calculated risks. Unfortunately, a considerable number of them lose their savings based on their unrealistic expectations.
Prevailing Market Conditions
Apart from the reasons cited above, the prevailing market conditions could also determine whether investors would be willing to put their money in stocks.
For instance, with everyone homebound, there has been a notable spike in stock trading with the COVID-19 epidemic. Nevertheless, many wealthy investors have kept off stocks amidst the uncertainty surrounding coronavirus and the U.S. presidential election.
How to Make Profitable Trades?
Profitable stock trading requires a high level of discipline. What’s more, this practice doesn’t stop, even after you make a lot of money. This means that you have to commit to following your investment plan continuously.
Now, most new stock traders have neither the patience nor the discipline to follow a proper investment strategy. As such, they do not make consistent profits. Yet others go into the stock market with the notion that they will make quick money, but they end up making losses instead.
If you are in the stock market to make a quick buck, you will never be successful as a stock trader. For this, you need to be passionate enough to spend your time learning as much as you can about the trade so as to get better at it.
To make money time and time again, you need to be among the best traders. While this is not easy, it can also be as simple as buying an index fund and holding on to it for the long term. This way, you get to accumulate profits. However, to earn higher returns, you need to develop the right investment strategies and follow them.
Follow the below tips to ensure your success as a stock trader:
- Always follow a well-defined trading plan. Find out what works and stick to it even when it doesn’t feel comfortable to do so.
- Don’t follow the crowd. Don’t be swayed by emotions. Instead, let your research, the stock fundamentals, and past performance guide you in making the right decisions. Remember that when you buy or sell due to panic, euphoria, or trying to time the market, you might do so at the wrong time, thus missing out on potential returns.
- The stock market tends to rise over time. So, if you have minimal experience or unsure of what move to make, buy an index fund and hold as earlier advised.
- Avoid making trading decisions based on short-term market volatility. Too much trade monitoring could cause you to keep chasing the market as you try to recover lost capital. On the other hand, over-caution could make you exit profitable trades too soon for fear of losing profits.
- Avoid being driven by greed or the lure of quick returns. Seek knowledge, proceed with caution, and always make calculated moves.
- Diversify your portfolio. Opt for a mixture of stocks from different sectors. This will allow you to meet your investment goals while spreading your risk.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
Stock prices rise and fall, but trading in stocks is an excellent way to create wealth in the long term. The good thing is that it’s quite easy to get started -even with little money. All it takes is research, dedication, and patience.
Besides, if you follow the tips outlined in this post, you will soon discover that stock trading is a worthwhile investment.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
Affiliate Disclosure: We participate in several affiliate programs and may be compensated if you make a purchase using our referral link, at no additional cost to you. You can, however, trust the integrity of our recommendation. Affiliate programs exist even for products that we are not recommending. We only choose to recommend you the products that we actually believe in.
