Stock enthusiasts are often curious about whether making a living in trading stocks is possible. Additionally, many people dream about quitting their job while sustaining their lifestyle in the financial market.
Depending on how often you buy or sell stocks, most people fall under two categories: traders or investors. Before delving into the nitty-gritty, you must understand what you are getting yourself into before considering your first trade or investment.
What is Stock Trading?
In general terms, stock trading is buying and selling shares of stock to make profits on daily price fluctuations rather than waiting for many months or years to receive an investment in company stocks. Many of us are familiar with 401K plans, etc., but there are two main types of stock trading.
Day trading is selling and buying stock on the same day or several times during the day. One can make huge profits with the large number of trades made by day traders only if done through a well-thought-out tactic.
Active trading refers to buying and selling financial instruments for a quick return based on short-term volatility in price. Here, there is no definite time measurement.
Tips on How to Make $50 a Day Trading Stocks
So, how do people profit from trading stocks, mainly when the stock market is full of volatility? Here are six tips on how you can make $50 a day in trading stocks.
1. Conduct Ample Research
Thorough research is integral before selecting an investment option. In addition to knowing the basics of trading procedures, traders need to research the best online platforms for active and day traders to keep up with the newest stock market updates and the events that could affect stocks and sectors.
Research also applies to choosing your stockbroker. Select your stockbroker wisely and try not to fall for just any broker. It is advisable to pick a broker with the tools and terms that best fit your investing style and experience.
It is advisable to only invest in the stocks you are sure about, and before you take any action, check the market volatility. Proper market research and consulting with a stockbroker can have a positive effect in the long run.
Companies and Stocks
Again, create a list of stocks you plan to trade and be sure to be informed about the specific companies and the general stock market trends. Conducting your research will help you understand the various economic or financial factors that ultimately affect trading results.
2. Understand Market Volatility
You can never predict the behaviour of the stock market. Stocks rise and fall at different times, and daily trading involves buying and selling many different stocks simultaneously. The stock market and individual stocks may fluctuate between 1 and 3 per cent depending on the previous day’s closing price and the various trading days trends.
For instance, stock priced at $30 will most definitely show a change in the value of about $0.30 to $0.90 per share. Always apply a stop-loss order to ensure that you lose less than 1% of your account value. (A stop-loss order is a set rule given to your broker to either stop buying or selling when the stock reaches a specific price). Risking 1% means that even though you are likely to lose five to ten trades, you will not have lost a large percentage of your capital.
3. Create a Stock Trading Budget
Many traders lose money in stock markets due to a lack of precise financial budgeting, allowing their actions and trade to be influenced by emotions rather than clear judgment.
Stock trading, however, does not guarantee financial or investment success. To make $50 a day, you need to assess how much investment you are willing to risk on every trade. Most successful traders risk with a lesser amount of 1% to 2% of their total account value on each trade.
The rule remains: always invest or trade with the amount of money that you are comfortable losing.
4. Adopt a Trading Strategy
Remember that you must understand the stock value or what makes a given stock worth your time and money to profit from the stock.
The amount of money you make on winning trades should be relative to the amount of money you lose. Meaning you can make up to 1.5% on the trades you win and lose 1% on the ones you lose. To achieve this ratio, place a profit range with a bigger margin from your entry point than your stop-loss order.
5. Consider High-Volume or Liquid Shares
When looking to trade stocks, another rule to stick to is to always be keen on liquid shares (stocks being sold rapidly) or high volume stocks. The total amount of shares that pass from one person to another in a day determines the stock’s liquidity. The shares’ liquidity determines the amount of profit you can receive on a given day.
6. Set Realistic Goals
Your stocks don’t have to win all the time to make them profitable. Most successful traders win 50% to 60% of their trades.
Set goals in advance that you can comfortably stick to and follow strictly, rather than chasing the high of earning profits. Ensure that the risk on every trade is limited to a set percentage of the total account. Also, ensure all the entry and exit strategies are well planned out with the aid of your stockbroker.
It is possible to make significant profits from trading stocks in the various financial markets. However, this requires knowledge and expertise, in addition to meticulous planning and execution of strategies.
Making $50 every day in the stock market can be easy, depending on how much risk you are willing to take, your capital base, and the market knowledge and experience you have. The market volatility, however, does not guarantee any profits. Gains and losses are part of the game. The key is consistency and faithfulness to a plan or strategy.