Essential Tools and Resources for Stock Trading

September 9, 2021 by No Comments

You need a live account, an online broker, and some cash to kickstart your stock trade. You can use a demo account for learning purposes or open a live one if you are ready. If not confident enough, you can open a demo account as you read a guide to trading until you feel ready.

Besides the necessary capital, which depends on what type of trader you are (day-trader, swing trader, etc.), nothing else needs to be done before you can start trading with real money. Most brokers allow you to place trades immediately after creating and funding an account.

In addition, some brokers allow you to trade using a practice account with imaginary numbers. You can even download free demo software and apply it to test your new strategies and tools.

What are the essential tools and resources for stock trading?

Tools of stock trading

  • A broker that provides online platforms for buying and selling stocks.
  • A computer, laptop, or tablet with a high-speed internet connection.
  • Fundamental knowledge of the stock market and understanding of the general trends, business cycle, etc.
  • A source of data such as stock screener to select stocks for buying and selling.
  • You can use online/offline software on a computer or laptop to draw charts and predict trends.
  • An online trading account to use the broker’s platform for buying and selling stocks.
  • A small amount of initial capital to test your knowledge and build confidence
  • Patience because stock prices can be volatile, and there are no fixed returns as such.

Resources available for stock trading

  • The internet, blogs, forums, news sites, etc., are valuable.
  • Investment magazines
  • Educational books
  • Free online courses on the stock market, trading, etc
  • Follow successful traders on Twitter or subscribe to their Youtube channels to learn from them and adapt strategies accordingly.
  • Any other site that provides educational material on stocks for beginners / advanced investors.

What knowledge is considered vital in stock trading?

About the Stocks

Stocks are bought and sold to make profits. However, in most cases, stocks do not provide fixed returns – there is no assurance that one will profit after buying the stock. It is because stock prices are highly volatile.

On the Broker

To trade in stocks, one has to open an online trading account with a brokerage company and use their platform to buy and sell stocks. A broker provides clients with access to the stock exchange, thus connecting buyers and sellers. Brokerage firms make money out of the commissions they charge for their troubles.

There are two types of brokerage companies: online and offline. Online brokers provide their customers with access to the stock market through an internet-based trading platform – this means that one can buy or sell stocks 24 hours a day, seven days a week. The platform is user-friendly and has advanced features such as stock screeners, live charts.

An offline broker provides its clients with a physical trading office. You will have to visit the office during business hours to trade, excluding nighttime and weekends. They only provide access to particular markets because their services are not available outside the country.

In other words, one cannot trade in foreign markets as an offline broker does not have a presence there. They only charge a flat fee for their services.

About the Strategy

One can trade in stocks using either ‘technical analysis’ or ‘fundamental analysis. Technical analysis is the study of charts that predict future movements in stock prices. It uses many indicators to make this prediction, including moving averages, exponential moving averages (EMA), Relative Strength Index (RSI), and more.

On the other hand, fundamental analysis studies the financial health of a company to establish whether it is over-priced or under-priced. Thus, fundamental analysts perform extensive research on a company’s financials to determine its stock price and evaluate income statement, balance sheet, and business model.

One can also combine both analyses to make better decisions in determining the right time to buy stocks. The result would be incredible given that technicals give an insight into the past while fundamentals hint about the future.

Your Final Take

All the above tools are mandatory to achieve success in stock trading. No tool can singly ensure high returns. The key to a successful investment lies in knowing the market trends and using that knowledge to adapt one’s strategy accordingly. Why adapt? Because not everything works the way, you want all the time.