Trading Stocks: Definition, How It Works, And Tips For Success As A Trader

Shares are now the most popular investment instrument today. It doesn’t have Trading Stocks to be those who have jobs, anyone can invest in shares as long as they already have an ID card and NPWP. However, in playing stocks, there are other ways besides investing to be able to get the maximum profit, namely stock trading.

Stock trading has become one of the most popular investment instruments for many people. Not only experienced investors, but people who just want to jump into investing are immediately involved in the world of trading.

It can be very fast to get big profits, not a few stock trading investors are willing to give up their employment status and focus on becoming a day stock trader.

Let’s get to know more deeply what is stock trading.

Definition Of Stock Trading

Stock trading is a transaction of buying and selling ownership certificates for companies or limited liability companies in the short term. Generally, the short term in question can be seen from the market price every day.

In addition, stock trading is an activity of buying and selling shares that depend on market price fluctuations. If you are passive when investing in stocks, then you need to be more active in trading.

People who Trading Stocks are also referred to as traders and are different from investors, because traders will be more active in analyzing stock price fluctuations every day and from here traders will choose the best stock prices. This is so that you can get maximum capital gain when you sell it again.

To become a stock trader, you must always analyze the market on a regular basis in order to get maximum profit when selling it. Because one of the traits that must be possessed to become a successful trader is to be able to determine when and when is the best time and price for buying and selling shares.

How Share Trading Works

In playing stocks Trading Stocks is also a choice that is no less popular than stock investment. The stock trading business itself means buying and selling stocks by taking advantage of daily market price fluctuations.

Here are some points to understand about how stock trading works :

1. Short Term

The difference between stock trading and investment is in terms of time, where investment is focused on long-term time, while trading is short-term transactions. This makes a difference in the strategy, principles and actions. This means that an investor’s stock transaction is not relatively short like a trader’s.

2. More Inclined To Technical Analysis Than Fundamental

If you are more passive in stock investing, while in stock trading you will be more active. This is because as a stock trader, you have to give yourself time to analyze the market and decide on the best time and price to trade stocks.

The analysis that must be used must also be able to compensate for the chosen time period. This means that the trader must be able to find the best solution in a faster time period than an investor uses, namely technical analysis.

This analysis can help traders see stock movements in the short term. This is because trading is more sensitive to market sentiment and market conditions than to the company’s fundamentals.

Therefore, the analysis must be more thorough and detailed on all risk factors. Because only then, you can get the best capital gains from the price difference that occurs when you buy shares and when you sell them.

3. Using The Buy And Sell Principle

The way stock traders work is to buy stocks at a certain price and sell them in a fairly short period of time as long as the stock value is within the desired range by the trader.

So a trader will not hold the stock asset that he has bought for too long and immediately sell it as quickly as possible when he sees an opportunity to be able to sell it at a price higher than the previous purchase price.

Traders usually expect higher returns than through regular investments. Or in other terms, stock trading uses a buy and sell system just like a real stock business.

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Tips For Success As A Stock Trader

For those of you who are new to the world of stocks and want to try their hand at becoming a stock trader. Here are some tips that you can try so that you can gain profits faster in playing stocks as a stock trader :

1. Learn First What Is Stock Trading In Deeper

Knowledge is power, so the best preparation to start something is how far you have learned it. In stock trading, it is not enough to understand what stock trading is and how it works

You also need to know about basic trading procedures, day traders need to keep abreast of the latest stock market news and events affecting stocks, such as Fed rate plans, economic outlook.

2. Prepare The Capital

In fact, even though the profits obtained can be greater than investing in shares, the capital required for stock trading is quite large. This is because you have to do bid and ask activities every day to get profit every day.

Because buying and selling shares does not always win, so the capital for stock trading is not enough to buy only, but also an emergency fund if you experience a risk or loss.

Assess how much capital is provided to risk each trade. Many successful day traders risk less than 1% – 2% of their account per trade.

If you have IDR 4,000,000 in funds and are willing to risk 0.5% of your capital on each trade, the maximum loss per transaction is IDR 20,000 (0.5% x IDR 4,000,000).

Set aside an amount of surplus funds that can be traded and are ready to lose. Remember, it might happen, it might not.

3. Plan Trading Period

Trading can be divided into two types based on the period, namely long and short term. Short term has a big risk, but the profit opportunity is faster. Meanwhile, the long-term risk is smaller, but the profit opportunities take a long time.

4. Determine The Right Stock Index

In general, there are 22 types of stock indices listed on the Indonesia Stock Exchange (IDX) that are often used by stock players. For example, IDX30 is the 30 highest-liquidity stocks and is backed by professional quality companies.

5. Choose The Right Security

When playing stocks, choose securities that have a low fee percentage. For example, 0.20% of the total purchase of shares. This is aimed at maximizing the profit obtained.

6. Avoid Penny Stocks

You may be looking for offers and low prices but stay away from penny stock. These stocks are often illiquid, and are likely to often result in jackpots that can result in even greater losses.

7. Be Patient And Start Small

All trading methods will not work if they are not carried out with patience. As a beginner, it is highly recommended to use a small capital and then be able to increase the amount as your trading skills grow.

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Don’t Be Careless And Keep Improving Your Knowledge

Wanting to be a successful stock trader means that you have to be patient and train yourself not to make decisions haphazardly. In addition, in playing stocks, it means that there is no end to learning and increasing knowledge so that strategies in playing stocks are even better than before.

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