If you’re looking to build true wealth, there’s a lot you need to keep your mind on. In addition to working a job, you’ll need to be thinking of different passive income strategies to increase the money you have coming in over time.
When it comes to passive income, there’s no way to make money with lower access to entry than in the world of trading. Getting into the stock market is a great way to make extra cash as long as you know what you’re doing.
If you’re a total trading novice, you might need to get familiar with a few trading strategies to ensure you’ll find some success on the market. What are some of the most popular trading strategies, and which should you employ?
1. General Trading Advice
Let’s start with the basics. There are several ideas you’ll want to get used to if you plan on trading, no matter what broader strategy you end up committing to.
You’ll want to set aside funds at the beginning of the process that, should a worst-case scenario occur; you could lose. You should not put anything into the stock market that you need to survive. Obviously, the more money you can put into the stock market, the more money you’ll be able to make.
However, if your funds are limited, you can start with as little as $100 and re-invest your profits to create a larger nest egg.
Trading is also going to require some of your time. You’ll want to set aside time to look into the news of the day and get familiar with the companies you are considering purchasing stock from.
Also, take the time at the beginning of the process to realistically set your expectations. While everyone dreams of getting rich overnight, it doesn’t happen all too often.
Making money off of the market is a slow marathon, not a race. Pace yourself and get ready for a long road ahead. If you want, you can even practice your stock trading on paper for a few days before actually putting money in.
See where you would’ve ended up and use it as a model for when you actually do start investing.
2. Position Trading
The most common trading strategy for a novice to the market to engage in? Position trading. Of the popular trading strategies, this is the one that takes the least amount of skill to master.
This sort of trading does not actually have a lot of active trading involved, which is why it works better for beginners who are new to the market. In position trading, the trader is looking to the long-term instead of the short-term.
The idea is to buy stock while it is low and plans to create a profit based on a long period of time. Is a certain stock down low now but might be up significantly in a few years?
A trader will make an initial investment now and hold the stock for many months or years as the stock eventually rises to new heights.
This type of trade requires a lot of patience, and it also requires some strong will. The stock will undoubtedly rise and fall quite a bit during the course of the trader’s hold, and you’ll need to brace yourself for the falls in price.
However, generally speaking, the market will go up over time, and if you hold through these ups and downs, you should be able to make a profit.
This strategy works best when investing in large, well-established, and stable companies. This strategy would not be well-served if you were investing in a more unreliable start-up tech company which might crash and burn if things don’t pan out.
3. Day Trading
When we think about trading on the stock market, we think about the active trading style of day trading. This is a process of buying and selling stocks and securities within the same day.
In some instances, a position might be taken in the morning and sold before the market closes at the end of the day itself. Sometimes, a position might be held for a few days then released.
Unlike in position trading, the hope in day trading is to make a smaller but quicker profit from trading. There’s more money to be made in day trading but a much higher degree of risk as well.
Generally, traders engaged in day trading invest in riskier stocks and securities that are more prone to rapid market movement. That means both up (hooray!) but also down.
Due to these high risks, day trading also requires a much bigger time investment on the part of the trader. You need to be keyed into the news of the day, watching the numbers, and working on your trades while the market is open.
Many people who are successful at day trading make it their full-time job. That gives you a sense of the time commitment needed.
Traders who spend this much time working with the market tend to employ specific working philosophies. There are many different day trading strategies in and of themselves.
For example, they turn to the Elliot Wave model for advice or base their trades on algorithmic principles.
You can read more about this kind of trading philosophy at https://kjtradingsystems.com/algo-trading-best.html.
Beginner Trading Strategies To Consider
If you’re new to the world of stocks and securities, you might feel like a fish out of water when it comes to trading. There’s no reason to be worried, however. If you can implement some of the above trading strategies, you’ll be well on your way to financial success.
Need more personal finances advice? Keep scrolling our blog for more.