Online trading is fairly complex and quite bewildering for the novice. You will need to obtain knowledge and skills before you start to earn and make good decisions. Here we take you through what this entails.
If you are keen to start online trading in South Africa, your first step is to select an online broker and get signed up with a stock brokerage account.
It is a good idea to read reviews comparing online brokers to find one that suits you. There are two types of brokers – a discount broker and a full-service broker. The latter will charge a higher fee, but you will have access to research analysis and professional advice.
Ideally, your broker will offer a demo model or virtual trading. This allows you to practice the requisite skills you will need to trade with confidence. Thus, you will have the opportunity to make mistakes while you learn without risking your savings and becoming disheartened.
The Johannesburg Stock Exchange (JSE) Virtual Trading Game is a fun way to learn how to trade online.
Increase Your Knowledge Base
A clear head is needed for trading. This means not responding based on emotions like greed and fear but using skills and knowledge to make decisions.
Focus initially on seeing the bigger picture. In a marketplace, when supply equals demand, an equilibrium price occurs. However, if supply is greater than demand, the market will move to a lower price. If demand is greater, the price people are willing to pay for a commodity will increase. As a trader, you need to make certain assumptions about how the market will move so that you know when to buy or sell.
Educate yourself by reading up on trading concepts, watching videos, and accessing tutorials. Follow trends in the stock market, not only locally but globally too as markets are interactive.
Selecting the Type of Shares That Suits You
If you want to save up for your retirement and did not start trading early in life, you are after capital gains and want a low-risk strategy. The best choice for you is to invest in blue-chip companies. Their shares are stable as these companies have been operating for a long time and have achieved financial stability.
However, if you are looking to make capital and are still young, you may prefer shares that offer above-average rates of return, albeit with a greater risk of losses. You will want to invest in growth shares.
These are shares in companies where high growth is expected.
If your objective is to avoid risk and receive regular pay-outs in the form of dividends, income shares will probably suit you. The danger of loss is low. However, you will not be adding to your capital amount.
Round Off Your Training
To become a proficient trader requires ongoing learning. Continue to read up on trading. Attend seminars or webinars. Watch a professional trader. Get a mentor or trading coach.
You won’t learn everything there is to know about trading overnight. Stick with it and make use of virtual options. Before you know it, you will start to get the hang of trading.
