When you think about making money online, the first thing that comes to mind are the various referral or network marketing methods out there. Or perhaps even freelancing. But there is one other method that tends to get overlooked for various reasons. That said, it’s probably the most glamorous one of them all: making money via stocks.
Absolutely, you can make money through a blog, selling various products, becoming a social media influencer and more, but these processes are often slow and not even guaranteed for success. These particular methods have their own limitations and problems.
But when you look to stocks, it can actually seem simpler than it’s played up to be. What we mean is that people think you need to have a lot of money to make it big in stocks. But the truth is, you don’t need as much as you might think.
Not only that, but you can make massive winnings (and losses) from it in a more controlled and logical environment. We’re comparing that to the volatile market of investing in cryptocurrency, and even the unpredictable nature of gambling. What this means is that you can have a better grasp of why you lost or won in the stock exchange rather than be at the mercy of chance whenever you invest in something else.
After you spend a little bit of time understanding stocks and the stock market, you’ll realize how powerful it can be and how much easier it’ll be to make more money for your future.
Before delving any further, you need to know the basics. There are two big ways for you to make money through stocks: day trading and long-term investing.
Day trading is the idea of taking advantage of the rapid fluctuations in share values. Small variations could potentially earn you more money the faster that you act. You’re buying and selling stocks within hours or even minutes. Your timing in all this is the difference between earning or losing money on a daily basis. We won’t be focusing on this, since not everyone can handle the emotional rollercoaster that is day trading.
Long-term investing on the other hand is exactly as it sounds. Your plan is to invest in stocks and shares long-term and sit on them. It’s a similar idea to what banks do and even how you handle money in a savings account. Funny enough, this is the method that banks use to pay you interest. While you’d think this may not be lucrative, it actually can be. You could easily make annual returns of 10% on average if you manage to get it right.
In order for all this to work though, you’ll need to have an understanding of investing and have general know-how.
Steps To Long-Term Investing
For the vast majority of people, long-term investing is what most people choose. As we’ve said, day trading can be lucrative, but not every person is ready to sit at a desk all day monitoring every detail and make precise trading methods around the clock.
The other aspect is that everyone have seen how much money people can make using long-term investing too. Not to mention how easy they make it seem.
Everyone would love to be in this situation and it’s actually pretty easy when you spend some time with it. Yes, the jargon can be tough and if you’re on your own, you’ll struggle to know where to start. To help, here are some of the steps that we’ll suggest for you to take.
First, Pick Something You Know
What we mean by this is invest in a company that’s in an industry you’re familiar with. For sure, you can invest your money into a massive pharmaceutical company or get some Apple stocks. However if the extent of your knowledge is that you take vitamins and own some Apple products, it might not be the smartest idea.
The reason we say that is that while you do support these companies, you may not be aware of what’s going on in those industries. You might not be aware of the challenges that industries or those specific companies are facing. Furthermore, you may not even be that interested or passionate about learning about those industries and adapting to that jargon.
Instead, focus on what you’re already interested in doing on a daily basis. If you love gardening, find a company that makes garden supplies whether it’s fertilizers or tools.
If you know the ins and outs of cars, invest in a car company that you support. If you grew up reading comic books, why not invest in Marvel or DC Comics?
Second, Open A Trading Account
When buying shares, you’ll need a trading account. This means you need to go to your bank or a broker depending on the type of trading you’re doing.
For those in long-term investing, you’ll want to speak to your bank first about it.
From there, they’ll arrange a meeting with an account manager and they’ll show you the basics and your options. More often, the banker will put your investments in a Stocks & Shares ISA, or something similar.
If you plan to trade online, you can look for a broker or a share dealing platform. Though make sure you do your research on these and read reviews as well. You’ll still be given an account manager to help you through the process too, so no worries about that.
Another aspect worth mentioning is when you open your account, make sure you’re opening a nominee account. What this means is that you’re nominating someone else to handle the stocks for you. In other words, you’re not responsible for “holding” that share of the business. You’re investing for the sheer sake of getting the returns from the stocks. That said, this doesn’t mean you should invest and ignore it. Do check on your stocks on a regular basis.
Another good thing about the online platforms is that you can open “practice accounts”. You’re given a certain amount of money and you’re allowed to play around with it to learn the ropes. All in all, you’ll get an understanding of it – if you invested real money into it, this is how it would’ve performed.
Third, Review, Understand, And Use Candlestick Charts
After having the account set up and you’ve got some stocks and shares, what should you do next? Well the first thing is to understand how you’ll be able to make money from these things.
To do that, first, never forget about your stocks. For those with a nominee account, you won’t have to worry as much, but it’s still smart to check on your stocks on a regular basis. You still have the final say in whether to hold the stock or to sell it.
And one deciding factor that’ll help you is to look at candlestick patterns.
These are a type of technical analysis that investors use to analyze the markets. These charts are the reasons behind various decisions. Best of all, these can be used in both types of investing methods.
While the chart can be confusing for beginnings, they offer more benefits than that. They provide market turning points as well. It shows you when a stock or share is likely to decline in value and even when you’ll need to move on to other things.
Overall, these charts can reduce your own risk and avoid losses if you can read them.
Before going further, it pays to know what these charts even are. The reason we call them candlestick charts is that the patterns resemble candles. They’re like bar charts. The only difference is that the main body of these charts depicts a range, rather than a precise total. These ranges are defined as a session’s open and close stock price. If the close is lower than the open, the body will be black (or red).
If the close is higher than the open, it’ll be white (or green).
On top of that, there are two thin lines that are displayed above the body known as shadows. These resemble the wicks of candles. The peak of the upper shadow represents the high of the session. The bottom shadow depicts the low.
Lastly, other colours and lengths of the bodies reveal whether the market is a bear market or bull market. These charts depict various things like doji patterns, dark cloud cover patterns, or shooting stars. From a glance, all this information provides you an indicator of when to sell.
While knowing all this is great, the last question is how are you going to be using these charts to begin with?
Well, from what we’ve told you, you’ll be able to glen a lot of information from it alone. If you notice a long white body for example, you’ll be able to tell this is a bull market. If the body is small, then you can determine that the bulls and bears are at odds with each other. That second example can suggest that the market is losing momentum and that means it’s an opportunity for you to invest if you don’t have any stocks in there or to cash in.
Based on the shrinking size, you’ll eventually notice a doji pattern with no body to speak of. What we mean by doji is it’ll be a line with an equal open and close.
Putting in time to understand these charts will greatly improve your investing strategy now and in the future.
Fourth, Develop Your Strategy
On the note of strategies, this is what you want to be doing next. You’ll need to have some kind of plan for the future. And your best odds of success is to have a strategy of your own. While you can develop one yourself, we’d suggest picking up one of these and experimenting with them:
- Breakouts – These are the most common methods around. You identify a key price level and buy or sell once that price breaks past that predetermined level. In most cases, the top level is set high enough and the low is set low enough to suggest that if the stocks were to hit those markers, they are bound to continue in that direction. All around, it’s a good starting strategy.
- Retracements – Your aim with this one is to identify a clear and continuous direction for a particular share. The idea is that once you identify this, it shouldn’t be long until the price reverses slightly as investors sell and newcomers attempt to trade in the opposite direction. This creates the ‘retracement’ that is good for you.
- Momentum – The simplest of them all. It involves looking for general forces and continuation in that direction. The whole idea with this is that you’re buying something that you’ve seen is moving quickly in the direction you want it to with the intention of selling it later.
- Position Trading – The last strategy is an add-on to momentum trading. The goal is to be in the market at the time that prices move. As a result, you build up your position in the market before trading it. It’s similar to momentum, though the approaches will often be different.
Consider Alternatives Like Binary Options
While stocks are great, this takes time to build up money and there are those who want to make money faster. Instead of jumping into cryptocurrency, there is one other option to consider that’s more controlled and less like you’re gambling your money away.
That option being binary options.
Think of them as a watered down version of stocks in certain cases. Of course, there is still some investment involved and there is still going to be risks involved, but it’s easier to grasp.
To start, binary options is the idea of trading stocks, Forex, precious metals and other assets, but with a twist. This twist is what makes binary options unique. The payoff is ‘binary’. What this means is that when you’re trading, you’re either going to get a fixed pay out or you’ll lose all the money you invested in.
It’s essentially an all-or-nothing, but this format makes it easier to understand and to practice compared to stocks. In stocks, you’ve got to worry about how much a stock increases or decreases.
Instead with binary options, you’re more concerned about the asset’s performance over a predefined period of time. From there, your job is to make a ‘call’ or ‘put’ and predict whether the value will go up or down in general.
If this interests you, setting up an account to trade binary options is similar to stocks.
First, you’ll need to find a binary broker. That said, this broker is the single most important consideration at this point. The broker you get will determine your fees and even the assets that you’ll be able to trade in too. You’ll also want to look at the companies themselves as some make it tricky for you to withdraw any money.
Some More Words Of Advice
The last thing that we’ll mention is whatever you plan to trade, make sure you have someone good to guide you and tutor you. It doesn’t have to be one individual either.
You’ll still want to be learning the ropes yourself and have an understanding of what you are doing and why though. Leverage practice accounts and talk to many people on this subject as well.
These things can save you a lot of time, as well as money as you’ll be able to learn yourself from the experience at hand.