Everything You Wanted to Know About How The Stock Market Works Click To Tweet
Today we will talk about how the stock market works, and how you can start trading today. First things first, how it works. The stock market is a consumer-driven market that relies on supply and demand. A stock is a piece of a company that is sold to the public. When a stock first becomes open to public trading its known as the Initial Public Offering (IPO).
Today I will show you an unconventional way to trade; it does not rely on “technicals” or anything of the sorts. Full disclosure I did not provide you with this method, a little background is necessary to understand how I stumbled across this method of trading. My friend’s father uses to be a top-level consultant at a trading firm, his boss and he were good friends, they always hang out together, outside of work. His boss drove supercars (a story for another time but the first time I drove a supercar I was young, and it was his car) had nice houses, and all the superficial stuff people think about when they hear how rich someone is.
I was a nerd when I was younger, and he took me under his wing and taught me the most of what I know today. To understand how big these guys were, one of the workers made software that calculated the perfect time to sell and buy a stock, if you want to see what the software looks like a log on to TD. Yup, a simple worker sold this software to one of the biggest trading firms for over 10 million dollars.
The method is called “Practical Trading” he had two different types of possible trading. One was short term and long term. I will be breaking down how to identify which stocks to buy for which opportunity in another tutorial. It is a beginners guide.
So let’s get into it.
Step 1: Make a trading account. It does no longer rely on which agency you cross through to open an account I suggest whichever has the lowest trading fees at the time.
Step 2: Fill your account with some money. Do not go overboard and put your life savings into your account but start with a decent sum of money. Don’t be a cheap ass.
Step 3: Identify which stock you would like to trade, at this point in your trading career I would not put too much effort into this because you can make money on any stock, its all about timing.
Step 4: Research Research Research. I want you to know everything there is to know about the company whose stock you will be trading. Say, for example, you will be trading Target. I want you to read the company’s annual budget, the goals, the mission statement, the vision, the new products coming to the store, etc. Knowledge is power, the more you know now, the more money you will be able to make.
Step 5: Leverage the information you gathered during step 4 to your advantage. If a new hot item is coming out in July, you will know you will want to own some stock by then. I suggest you buy a few MONTHS in advanced. Yes, I do. No one tells you to go that far in advance, and that’s the beauty of this method, nobody does it. Let’s take an example. Say a new hot boot is coming out in July in the target. I would buy a bunch of Target stocks in April. They will be cheap then. Right after the new boot drops on July 1, I sell the stock about a week after. That way you buy for cheap and sell at a high price.
Step 6: Money time. Watch the money roll in, however, do not just go out and buy yourself a new watch put at least 75% of the profits back into your portfolio, to make more money on your next targeted stock.