What does it mean to play on the stock exchange or invest in stocks? And which of the two phrases is the most correct? This article is intended as a guide for those who are novice traders or for those who want to know more about the world of finance and the stock exchange.
With the development of the Internet, the stock exchange has become electronic and it is no longer necessary to go to a physical place to be able to buy and sell shares. Today you can buy and sell shares directly from home with an internet connection, a computer / smartphone / tablet and an account opened with a broker.
We at Meteofinanza.com have reviewed the best regulated brokers on which you can invest safely on the stock exchange, since all the brokers reviewed have obtained the authorizationfrom the financial market supervisors.
Consider this article as a sort of introduction to the world of the stock exchange, to understand how the stock exchange works and how to invest in the stock exchange.
You could also be interested in How to invest online in the stock market from scratch: guide for beginners
Is it worth investing in the stock market? What is a stock exchange?
Let’s start by explaining that the stock exchange is nothing more than a regulated and organized market for buying and selling financial instruments (bonds and shares), currencies and derivative products (futures, covered warrants and ETFs).
The function of a stock exchange is therefore to act as an intermediary, that is to put in communication those who want to invest their money with those who need that money in order to invest in their company or in other economic activities.
We can see right away that investing in the stock market is not something abstract, but it is an operation very tied to the real economy. The strength of a stock exchange is that of regulation, given that there are supervisory authorities which have the function of checking that all transactions are correct. This security leads more and more buyers and sellers to invest in the stock market and to enter liquidity, which brings benefits to the entire national economy.
Playing on the stock market: meaning of IPO
Before you can invest on the stock exchange , a company must be listed on a stock exchange. The stock exchange listing process is called IPO.
IPO is nothing more than the English acronym for Initial Public Offering. It consists of an offer intended for the public for the purchase of the shares of a company that intends to go public.
The IPO can be divided into three different types, which we will list to improve understanding:
- Public subscription offer. It consists in the sale of entirely new shares issued by a company that is about to go public.
- Public sale offer. It occurs when a company sells shares that are not new but already owned by the shareholders.
- Public offer for sale and subscription. This typology is a mixture of the two listed above.
If the IPO is successful, the share will remain in the indicated stock exchange and it will therefore be possible to buy new shares or sell those already owned (or purchased during the IPO phase).
How to start to play on the stock market and how does it work?
More and more people decide to approach the world of stock exchange and online trading, intrigued both by the possibility of earning excellent profits, and by the possibility of selling and buying shares.
We have all heard of the stock market, but how many of us really know how the stock market works and how you can play on the stock market today and make money?
Let’s start our article by answering these two questions.
How many today hear of “playing on the stock market or investing online on the stock exchange“? If in the past you have heard of financial markets it might have seemed strange and unusual, today we are daily involved in market decisions. This for many can represent on the one hand “the bogeyman of the economy” and, on the other hand, a great opportunity.
In this guide we will talk about how to start playing online and how to invest in stocks. Let’s say right away that you can play on the stock market to pretend, with a free demo account offered by the platforms for a trading simulation. Let’s try to focus more on how not to lose money on the stock market, surely we will already be one step away from success. Earning money also means not losing money, to start on the right foot.
Playin on the stock exchange: what does it mean?
The term playing on the stock exchange (or even trading on the stock exchange), commonly used by non-professionals, is little appreciated by insiders, who prefer to replace the term “playing on the stock exchange” with the term “investing on the stock exchange“.
Obviously it is not a game, but an investment. Often the idea is associated with gambling, but the stock exchange has nothing in common with the latter. However, playing on the stock market has now become synonymous with trading stocks.
If you are considering the possibility of investing in the stock market through online trading, you can consider CFDs, which are an easy to understand tool, also used by beginner traders and which, thanks to the regulated online trading platforms, allow you to invest in stocks through a demo account or a real account; one of the best brokers in circulation is certainly eToro, as we will see later in an ad hoc paragraph.
How to play on the stock exchange with CFDs
If you want to invest in the stock market and earn immediately and effortlessly, you are out on the wrong path, unless you have a capital to burn. If not, keep in mind that CFDs are a complex derivative instrument; in fact, their price exactly replicates the share price.
All profits can be obtained from CFDs and are proportional to the value of the share. In short, if you have predicted that the share will go up and it goes up slightly, you will earn little; if instead it goes up a lot you will earn a lot.
In the event that the share does not go up but goes down, you will suffer a loss. This will be limited if the descent is light, heavy if the descent is more marked.
On the other hand, investing in the stock market with CFDs means closing a position whenever you want it. So if you are betting on a share and the price is falling, you can decide to sell immediately.
You can also set the maximum loss value that you are willing to accept. In the event that that loss occurs, trading closes automatically. In practice this system is called Stop Loss.
Similarly, you can also set a maximum profit value at which to close the position in profit, and this is called Take profit.
The best brokers that we will illustrate during this study allow you to play on the online stock market thanks to the leverage which, in many cases, is 1:200. With the new provisions of the European Securities and Markets Authority (ESMA), the maximum leverage level for equities has fallen to 1:5.
The best CFD trading platforms are often completely free and do not apply any type of commission to invest in the stock exchange.
At the moment the profit is obtained from the spread that for you, as a trader is a cost, while for the broker it is the gain.
The spread is the difference between the sale price and the purchase price.
How to play on the stock exchange from home and how does the stock exchange work?
Each country has its own national stock exchange. A world-famous stock exchange that you have surely heard of is the Wall Street, which is based in New York, USA, whose official name is NYSE (New York Stocks Exchange). In Europe, other important stock exchanges are that of London (English stock exchange) and that of Frankfurt (German stock exchange). But what is a stock exchange? Simple: a stock exchange is a physical place where exchanges take place. Investing on the stock market therefore means investing in equity securities or in other products tradable on the stock exchange.
Therefore the stock exchange has a physical place where buyers and sellers can meet. But as we have already anticipated, with the advent of the internet the stock market moved online and therefore it was possible to start playing the stock market from home.
Therefore, nowadays, exchanges of equity securities can take place both “offline”, therefore on the stock exchange itself, and “online”, through companies specialized in online trading (brokers) or through the banks themselves. By now, each bank offers its customers the opportunity to open an account for online trading and therefore to play on the stock exchange: most likely, your bank also offers such account.
This underlines the importance that the stock exchange and online trading have acquired over the years. Each exchange has a list of stocks that traders (as people who play on the stock exchange are called) can buy and sell. By stock we mean companies that have decided to go public: companies operating in different sectors can be listed on the stock exchange. The banks themselves are also listed on the stock exchange. Each stock has its own value, which depends on different factors such as:
- Demand / offer related to that share
- The value of the company behind the stock
- The assets available to the company
- The profits and debts that the company owns
- The condition of the market where the company operates
In short, many factors are taken into consideration for the value of a share. The study of all these factors is entrusted to the branch of fundamental analysis, the purpose of which is to evaluate the real value of a company, so as to understand what is the right value for the share. But why is it important to know how much a stock is really worth? Let’s find out in the following paragraph.
How to play online on the stock exchange: long and short
Knowing how much a company’s stock (also called simply “share”) is really worth is essential to understand when to buy and when to sell. In fact, playing on the stock market means buying and selling stocks.
That’s exactly what traders do: they buy and sell stocks, always aiming to make a profit. The gain is generated by the price difference from the time when you buy and from the time when you sell (or vice versa), minus the commissions, if any-
So you can play on the stock exchange in two ways:
- Long positions (also called bullish positions): In this case, traders buy a stock and then sell it at a higher price. If maybe I buy 1000 Google shares, and each share is worth (for example) € 4.50, and then resell them after a month when they are worth € 5.60 per share, then my earnings will be equal to the difference in value multiplied by the number of actions. Therefore I will have: € 1.10 (difference in value) x 1000 (number of shares bought) = € 1100 (profit).
- Short positions (also called bearish positions): In this case, traders sell a stock (lent by the broker or bank) and then buy it back at a lower price (and return it to the broker or bank from which they received it on loan).
Most likely you understand how the stock market works with regards to the long positions: the trader decides on which stock to invest, chooses the quantity to buy, and then waits, until the value goes up and then sells it (generating a profit).
However, we think that perhaps you still have some confusion regarding short positions, one of the pillars of how the stock market works.
In short positions, you only earn when the value of a stock falls. As we have explained above, the trader borrows a X number of shares from the broker; basically, it is the broker or bank where the trader has opened his trading account, which is responsible for buying on the market the quantity of shares required by the trader. This quantity is then passed to the trader, who must immediately sell it (the process takes place automatically).
Obviously the profit generated by the sale remains blocked in the trader’s account: that money is in fact used to buy back the same amount of shares loaned by the broker (or bank). When the trader goes to buy back the same amount of shares (which he must return to the broker or bank), if the value has dropped, then he will get a profit; if instead the value has increased, the trader will suffer a loss.
Below you can see a concrete example of short selling:
How to play on the stock exchage without any risk
Investing in stocks always involves risks, this is a concept thah you should always keep in mind. Anyone who tells you the opposite is lying to you, or is not well informed on the subject. The stock market, like any form of online trading, involves risks: it can be said that risk is part of investing in the stock market.
Financial risk is the possibility that the investment will not be successful, or that it will not pay off as expected. Or that it even causes us a loss. But when we talk about risk we are not referring to only one risk: in fact there are many when you want to play on the stock exchange.
The main risks related to online trading are:
- Specific risk: linked to the performance of the asset in which we invested.
- Systematic risk: linked to the fluctuation and variation of the prices of the assets on which you invest.
- Risk of the manager: linked to the skills of those who manage your capital, in case you have entrusted yourself to an investment fund, a managed account, a consultant or a financial promoter (or yourself, in case you invest your capital directly).
- Market timing risk: linked to the possibility of mistaking the moment of entry and exit in one’s operations.
- Liquidity risk: linked to the possibility of having to sell a stock that has little market (or is not very “liquid”).
- Emotional risk: linked to how your emotions are managed during online trading.
As you can see, there are many risks to be faced when deciding to invest in the stock market. We must never forget this, but more importantly, we must never forget that sooner or later one of these risks will lead us to make a mistake. Because as we will show you in the next paragraph, nobody is foolproof in online trading.
How to start playing on the stock market?
Many wonder how to play the stock market or invest in the stock market.
We are of the opinion that to make money with the stock exchange, we must first try to understand how prices will move.
First of all you have to choose which stock exchange you want to invest on. Once you have decided this you can proceed with the following steps.
The first step is to try to understand what is the market trend and act accordingly.
There are many traders who can understand how the price of a share will move simply by observing the chart. In this case we speak of technical analysis.
At the same time there are traders who prefer to reason on the data released by the company (profits or losses, level of indebtedness, state of the market, etc…).
It should be remembered that many financial analysts disseminate their analysis of the state of the quotations completely free of charge and these analyzes also contain detailed forecasts on price trends, which can then be used to invest.
Our advice for investing in stocks is to follow the right experts and never stop studying and engaging.
What really matters is not the initial preparation, which can always be improved over time.
It matters much more to believe in it, to commit yourself, to put your soul and courage into it.
We are certain that these are virtues of a psychological nature, even if it’s the psychology that really makes the difference when investing in the stock market.
Investing in the stock market from home can also become a real job!
In fact today there are many people who, following these simple steps, have managed to become professional traders and today we can say they live on the stock exchange.
It is not said, however, that you cannot succeed. Many traders have even managed to achieve wealth, a truly coveted goal for all those who start investing in stocks.
There is, however, a very important condition for success when investing in stocks from home: choosing the trading platform well.
Learn to play on the stock market: no one is foolproof
This is a point that we should specify: playing on the stock market is not child’s play, and like any activity, it involves risks. Just as a trader can earn by investing in the stock exchange, he can also lose if his forecasts turn out to be wrong. In fact, if we buy a stock thinking that the value will increase, but then the value actually decreases, then we will suffer a loss.
If you think that the world of the stock exchange is “a magical” world where anyone can enter and trade online, earning buckets of money every month, then you are on the wrong path. Investing in the stock market requires patience and also the right amount of knowledge. Learning online trading and playing on the stock market is possible: today there are many sources of information online (such as our own financial portal), as well as many books (and e-books) about it. We at Meteofinanza.com have compiled a list of the best books for online trading, where there are also tips on how to invest in the stock exchange.
Not to mention the possibility of video guides on the internet, as well as real courses taught by experts and professionals in the sector. If you want to play on the stock market, you must arm yourself with patience and start studying. The key topics you will need to learn first are:
- How to read a financial chart
- Technical analysis
- Fundamental analysis
These can be considered the fundamental pillars of online trading. Therefore the main mistake to avoid is to have the wrong mental attitude: if you think of making easy money by investing in the stock exchange, forget about online trading. Come back down to earth: studying, and then practicing a lot, are the first basic steps. We are not saying that it is impossible to make money with online trading: everything is possible, but it entirely depends on how long you want to spend studying.
After all, here we are talking about investing money, more precisely yours: the more you will know the stock market and how to interpret it, the less risk you will run when you will invest. In fact, in online trading and on the stock exchange it is impossible to eliminate the risk factor; but you can definitely learn to control risk, aiming to limit it.
How to learn playing on the stock markets: investing in short-term or long-term stocks
When you decide to play on the stock exchange, a question that is often asked is the following: better to invest in long-term stocks or invest in short-term stocks? After all, the period of time that you have to take into consideration when you want to invest in the stock market is crucial. It is good to specify from the beginning that if you invest through the classic stock market, it is normally advisable to invest in the long term.
In fact, in the stock market there are hardly any investors who focus on the short term, because when buying and selling shares you have to pay commissions for the transactions carried out. For this reason, investors prefer to carry out transactions in the long term: in this way they can cut costs and related commissions, in addition to obtaining greater earnings (because the more time passes, the more the value of a share will vary).
If, on the other hand, you want to invest in stocks through other financial instruments, such as CFDs (contract for difference), it is often the right investment in the short term. In fact, this financial instrument is well suited to short-term operations, or which even take place within a single day, i.e. intraday trading, or even in a couple of hours or less for those who prefer scalping.
Therefore, the first thing to do is to consider how you want to invest on the stock market: whether to do it through the classic stock market, or through CFDs, futures or options. Another fundamental point for the choice is to base your decision on your analyzes and forecasts. If we have studied the performance of a stock and we expect a rise in a month because a strong bullish trend has just started, it is obvious that we will have to invest in the long term.
Conversely, if our analyzes and forecasts indicate short-term trend movements, we will aim at investments with a shorter duration. In addition, you must always consider your trading strategy: there are more useful strategies for long-term investments and more useful strategies on short-term investments. Without forgetting the time factor available: not everyone can spend whole days in front of the computer playing on the stock exchange, ready to analyze the financial markets and invest.
- Those with limited time should definitely invest in the long term. In this way the trader will aim to open a few transactions, focusing on the quality of the same (therefore looking for strong price changes in the values of the shares).
- Those who have a lot of time available should instead invest in the short term, because they can better analyze the daily trend of the markets and also take advantage of the opportunities that occur in the short term.
This does not mean that a trader can both invest in the stock market in the long term and invest in the short term. By doing so, a trader is able to diversify his portfolio, an additional advantage.
Invsting in shares of 10 companies belonging to different sectors or to the same sector?
Another very important rule to follow when you want to invest in online trading is to diversify your investment portfolio. Diversifying simply means investing in different stocks, possibly belonging to companies operating in different sectors and markets. The reason for this choice is very simple: if you invest in shares belonging to different sectors, you can better mitigate the risk associated with the investments made.
To put it simply, in the event that a share causes you a loss, you can absorb that loss thanks to the gains made with other stocks. This is why you should never invest all your capital solely on the shares of a single company: in fact, if the value of the shares of that company drops, the loss that you will suffer will be really big. But if you have invested only a portion of your capital on those shares, your loss will be lower, and at the same time you will be able to earn with the remaining capital invested on other stocks.
For what concerns the idea of investing on stocks in the same sector, the reasoning is quite the same. Playing on the stock market on different stocks, but all of the same financial sector (such as banking, or automotive, or services, etc …) can expose you to great risks.
Where to play on the stock market
At this point, if you have chosen to invest with CFDs, there is no problem.
What you need to do is decide which investment platform to use.
Obviously here we are talking about investing in the stock market from home, and as such the platform must necessarily provide access via the internet.
How to play on the stock market with CFDs
There are different ways to play on the stock market: what we have explained to you so far is the “classic” way. That is, investing in the stock market, buying and selling stocks. It is good to know, however, that there is another way to invest on the stock exchange, namely CFDs (Contract for Difference).
These are nothing more than financial contracts that are based on the value of stocks. That is, when you use CFDs to invest on stocks, you are not actually buying or selling a stock. CFDs are based entirely on the value of the share and its performance. CFDs have one strength: leverage.
CFDs require the trader to predict whether the value of a stock (or even other asset) will rise or fall. Once the position is opened, everything will depend on the course the share will take. The gain or loss is nothing but the difference between the opening and closing values
Stocks are only used as an underlying asset, which means that their value is taken as a reference point. We explain everything with a simple example, the values shown are obviously fictitious.
We want to play on the stock exchange on Google shares using CFDs. According to our forecasts, the value of Google shares will increase shortly. For this reason we decide to invest by opening a long position. If instead we wanted to invest in the decline in value, we would have had to open a short position.
Example: at the moment the security is listed at € 17.00 per share, let’s say we have invested € 170, therefore buying 10 shares. If it should go up to € 20 our earnings will be € 3 per share, therefore € 30. It does not end here, because CFDs are subject to leverage, which we admit is 1:5. Our value will be multiplied by € 5 and the profit will therefore rise to € 150!
Of course, in the event of a fall, the question would be the same and we would suffer a loss, therefore we must be careful about the leverage, which can be a double-edged sword.
How to play on the stock exchange
At this point we try to summarize the path that leads to playing on the stock exchange.
Now you can proceed to the next step. Basically you have to determine which platform you intend to use.
However, this is a fundamental choice, as choosing a quality platform guarantees a very high probability of earning.
Once you have selected the platform, you just have to open a trading account, after registering.
One of the best platforms to start playing on the stock market is IQ Option; this platform allows you to start with just € 10 of starting capital.
In case you choose to trade with this broker, you can start trading in demo mode, therefore without depositing in the account even one euro.
How to play online on the stock exchange?
Today, unlike when it happened some time ago, the stock exchange, or rather the markets, have become accessible to everyone thanks to modern telecommunication technologies. Nowadays anyone can play on the stock exchange, trading online, directly from the computer at home.
Financial markets were initially accessible only to institutional investors or private individuals with large financial resources. Time passed and, with the introduction of the internet, online trading has arrived “in everyone’s homes”. All you need is a computer, an internet connection and an amount to start with. In addition to time and patience to learn the concepts of online trading and do the necessary practice before moving on to the actual action.
To invest on the stock exchange, today there are different financial instruments:
- The classic stocks
The CFDs differ from classic stocks mainly because you never really own the exchanged asset. By asset we mean the equity security (but it can also be an equity index). This means that with the classic stock investment, the trader buys and owns the stocks he purchaes. That is, the trader become a (minority) partner of the company in which he invested.
Using other financial instruments, such as CFDs, means speculating on the price trend of an equity security. In this case, you do not own the stock, but only a contract that can lead to a gain or a loss, depending on the difference between the initial purchase price of the contract and the final sale price.
Traders often decide to use the latter type of financial instruments also because it is possible to trade by investing less capital, compared to the classic stock market.
Investing in stocks with CFDs and Social Trading
In this paragraph we want to focus on CFD trading. As we explained in the previous paragraphs, CFDs are also derivative instruments, therefore they are used to speculate on the trend of the value of the assets. This means that when you buy and sell CFDs you will never own the traded asset (as opposed to classic stock trading).
Moreover, with CFDs you can trade:
- Stock indices
- Forex currency pairs
Leverage plays an important role in CFD trading: through leverage we can literally multiply the value of our investment. Just to give an example, if you use a 1:10 leverage and invest € 100, thanks to this leverage you can move € 1,000!
All this is made possible thanks to the effect of leverage, which is a sort of “loan” (if we can define it so) by the broker, thanks to which you can invest higher amounts than what you really own.
This means that your earnings, but also your losses, will be calculated not on the € 100 you actually invested, but on the € 1,000 that you have invested thanks to leverage. Therefore leverage can amplify gains on the one hand, but losses on the other.
eToro is one of the leading brokers in the CFD sector, very suitable also for non-professional traders and for those who want to approach the world of online trading (also thanks to the offer of the free and unlimited demo account).
But if we talk about eToro, we can’t avoid talking about Social Trading. For the uninitiated, eToro was the first broker to introduce Social Trading in CFDs. Thanks to Social Trading it is possible to invest by copying (automatically) the operations carried out by other traders registered on the eToro platform. Just a couple of clicks will be enough to find the traders to follow, choose the amount to invest, and you’re done. In this way, even novice traders can take advantage of the knowledge and experience of professional traders, copying their operations.
Playing on the virtual stock exchange: what is it and how to invest in stocks through online trading?
The Virtual Stock Exchange is nothing more than a simulation that allows us to create a portfolio of virtual securities, investing in shares listed on the stock exchanges in the world. It will therefore be possible to simulate exchange trades, monitor their performance and evaluate the effectiveness of trading strategies.
A distinction can be made between real online trading “video games” and demo accounts offered by financial brokers.
In the latter case, a demo account is nothing more than a method to simulate online trading. It is an account similar to the real one, thanks to which you will have access to a trading platform; the only difference is that the account has a “virtual” balance, so you will never use real money to trade online. In this way, you can familiarize yourself with the platform and practice, without pressure or the risk of losing real money.
If you have never traded before, it is always advisable (if not mandatory) to start practicing through a demo account, for as long as you need. Often the demo accounts are offered for an unlimited time and also for free: you just have to register and you will have access to the demo account.
Playing on the stock market with IQ OPTION
IQ Option is one of the ideal brokers to learn how to invest in stocks with CFDs. Since we turn to beginners, it is obvious that they are looking for an online trading platform that is easy to use and very intuitive graphics. These two characteristics are the strengths of IQ Option.
This broker is aimed primarily at those who have chosen to play on the stock market through CFDs recently and therefore need training. On IQ Option there are many video tutorials that allow you to learn how to use CFDs in an easy way. The use of the videos is absolutely free.
Of course, practice is also needed alongside theory. One of the biggest risks when starting to trade with CFDs, in fact, is to run into errors not related to strategy, but to knowledge of the rules.
In a nutshell, therefore: thanks to the combination of IQ Option demo account and video guides, you can learn to trade CFDs on shares from the comfort of your home.
ATTENTION – The advantages of IQ Option don’t stop there. If we told you about this broker it is because it is one of the few that simplifies the registration mechanism. In fact, it is sufficient to enter a few data to immediately have access to an IQ Option demo account. No deposit is required, not even a few euros! The IQ Option demo account is absolutely free and for this reason it is the best way to learn to invest in the stock market.
Where to play on the stock exchange: simple steps to take
The first thing you need to do in order to start investing, and not playing, on the stock market, is to be informed.
After having understood in the best way what are the best patterns with which to invest, start trading in a simple and conscious way.
Having said this, let’s see how it is possible to invest in the stock market and earn by playing on the stock market.
How many of you, especially in this period of international crisis, have found themselves hearing about:
- invest safely today;
- stock market indices that rise and fall (DOW JONES, NASDAQ, S&P 500);
- the stock exchange closed negatively;
- stock exchange quotes;
- stock exchange;
- how to invest in bonds, safe stocks, bank stocks, etc.
These are all terms related to the stock market context.
Now, how many of you have found themselves, driven by curiosity, to seek information on similar topics such as:
- What does it mean to play on the stock market?7
- Is it possible to play the stock market from home?
- How to invest in the stock exchange online?
- How to play for free on the stock exchange?
- How to start playing on the stock market through simulation?
- What are the best platforms to play on the stock exchange?
So if you want to play on the stock exchange with online trading and invest in shares with CFD trading (CFD on SHARES), then continue reading our article, where we will explain the best way to obtain a lasting and constant profit, by examining what could be the possible risks associated with stock market prices.
5 mistakes that you should never make when you play on the stock market
In this paragraph we will show you the 5 most common mistakes that many traders make when they start playing on the stock market.
1) Only thinking of the short term
When you decide to trade online, you need to think about the long term. If you want to make money only in the short term, perhaps by following the saying “all at once”, you will end up losing all your money.
Online trading requires patience: if you are in a hurry, you run a greater risk of making bad decisions (which equate to economic losses). Try to find a good trading strategy that allows you to earn in the long term, constantly.
2) Thinking of getting rich in less than a month
Earning with online trading is possible: after all we are in the investment field. But thinking about getting rich after just a couple of weeks of trading can only mean two things: naivety or lack of information.
Online trading is not a method for getting rich quickly. It is good to clarify this concept immediately. Just think that, if you have never traded before, you must use a demo account to practice for at least a month. Only then you can switch to a real account, still using very low figures, to avoid losses due to the lack of experience.
3) Trading without knowing anything about the financial markets
It is equivalent to thinking of being able to drive a car without ever having taken a driving lesson. That is, a certain disaster. To trade online and make a profit, you need to study: technical analysis, fundamental analysis, financial charts, trading strategies, financial news and macro economic data.
4) Believe in elusive ways to get rich with online trading
Unfortunately on the internet there are some sites that sponsor phantom trading methods, strategies or robots, which would guarantee you incredible profits without even lifting a finger.
Usually these sites are composed of a single internet page, in which there is a (very long) video that explains in detail what this imaginary method they are proposing is. Usually the “incredible” results are also shown, complete with photos of luxury cars, exotic holidays and various yachts. Often there are also reviews from other users at the bottom of the page, which all guarantee the excellent quality of the system offered by the site.
Obviously, this is a real scam: the reviews are fake, the images are taken from google, and the whole story related to the trading method (or robot or strategy) is a colossal bale. The only purpose of these sites is to sell you a product, so that they can earn on your skin (and naivety).
5) Investing more than you can afford to lose
When you start trading online, you must first choose the amount to start with. In this case, many inexperienced traders make the mistake of investing a sum too high for their pockets, perhaps driven by the idea that “the more funds I invest, the greater my profits”.
The amount you choose to invest should not affect your financial status: in a nutshell, do not choose to invest sums that you cannot afford to lose! If you have never traded online before, imagine that the amount you initially invest is “lost fund”: we are not saying that you will lose that money, but you must imagine that that money is “blocked” to be used in online trading. So you can realize if you have chosen an appropriate amount for your finances to invest in the stock market.
What are stock exchange indices?
The stock market index is nothing more than the general situation of a market, reported in a concise way, precisely by an index.
So we can define the stock market index as the average of the price of some selected stocks. These are divided into:
- specific stock market index;
- stock market index by capitalization.
For example, when we hear the expression “NASDAQ stock price rising or falling”, it means that the stock market has risen or fallen on the basis of all the equity indices that include it; then we will have to go to study specifically the index of our interest and see if it is rising or falling.
Why are stock exchange indices so important?
These are very important for the simple fact that they represent the overall market sentiment of a given economy. Pay attention then to verify the individual shares as we mentioned before, since we remember the stock market index does not only represent the performance of a share, but of a basket (a group) of shares.
Final opinions for those who want to start playing in the stock market
Investing in the stock market and making money with online trading is possible: there are many people who wanted to start trading online to earn a few extras every month. Much depends on your financial availability, as well as how long you want to spend studying online trading. Always remember that investing in the stock market has its risks: the important thing is always to earn more than what you lose, aiming for long-term gains.
If you want to invest on the stock exchange, the next step is to study the pillars of online trading and find a broker (or bank) with which to open an online trading account to start investing in the stock market. Unless you want to trade with other financial instruments, such as CFDs, which certainly require much less capital to get started.
The stock exchange is nothing more than a regulated and organized market for buying and selling financial instruments (bonds and shares), currencies and derivative products.
The term playing on the stock exchange (or even trading on the stock exchange), commonly used by non-professionals, is little appreciated by insiders, who prefer to replace the term “playing on the stock exchange” with the term “investing on the stock exchange”.
To invest on the stock exchange, today there are different financial instruments: classic stocks and CFDs. This last method differ from the first mainly because you never really own the asset traded.