How to Invest and Trade Stock for Beginners

How to Invest and Trade Stock for Beginners - Most people think stock investing is complicated. Beginners can try various methods of stock trading, one of which is by using their smartphones to trade online. Besides, having plenty of information available can help you prepare yourself to learn patterns and market conditions. Now is the time to start trading stocks.

What's the Difference Between Stock Investment and Stock Trading?

The general public must understand the terms used in the stock industry. So, beginner investors need to learn a lot and read before investing. When saving stocks began, the terms "stock investment" and "stock trading" were the most commonly used. What do stock trading and stock investment mean? And what's the difference between the two? Next, let's follow.

What's the stock market?

Let's start by understanding what a stock is before we can understand more deeply what it means to trade and invest in stocks. Shares are proof of ownership of a company and are evidence of the wealth and profits of the company. This means that when you buy shares, you automatically become the firm's owner and receive a share of the corporate profits.

Do you know what a stock investment is?

So, a stock investment is investing capital in a company listed on the Indonesian Stock Exchange and marketing its shares. Investments do not yield. That means, as an investor, you do not run the business directly; instead, you only invest several funds, which are then managed by the company involved.

Investing in stocks can also be unprofitable to you, like doing business. Therefore, before deciding to invest, it is essential to know and understand information about the company where you will invest your capital. This is because you will benefit more from your investment by managing risk factors well.

Stock Trading: What's that?

Stock trading is buying and selling stocks using daily market price changes. As a stock trader, you will give yourself time to analyze the market and decide the best time and price to do stock trading so that you will be more active in trading than investing in stocks.

In this way, you can get optimal capital gains from the price difference that occurs when you buy stocks and when you sell them.

To be more apparent, the following things will be explained:

1. Principles: Buy and Hold versus Buy and Sell A stock investor tends to use the buy-and-hold principle when investing in stocks. This is because they usually invest capital in long-term plans.

Stock investors tend to care less about rising stock prices because the timeframe is uncertain and depends on each investor. However, investors usually sell the stock when their investment objective has been achieved.

On the other hand, a stock trader uses the buy-and-sell principle. They will buy stocks at a specific price and then sell them relatively quickly if the stock value is already within the range the trader desires. Traders usually expect greater profits than conventional investments.

2. Fundamental vs. Technical Analysis: Stock investors usually use corporate fundamental analysis because they tend to invest capital for the long term.

Information such as the financial statements, performance, and stock development of a company over a certain period is known as the corporate fundamentals. This information can be used to assess how well the company manages its business.

Investors will have less risk of losing if they invest capital in companies with good foundations.

However, stock traders tend to use more technical analysis, which can help them understand stock movements over a short period.

Trading is more sensitive to market feelings and conditions than corporate fundamentals. As a result, the analysis must be carried out more thoroughly and in-depth on each risk component.

3. Risk is the following difference: Investing in stocks has a much lower risk than trading stocks. Because of the lower risk, the yield tends to be lower.

Stock investors are usually more selective in choosing which companies they will invest their funds in, including blue chip companies that are already well-known and have shown solid fundamentals.

However, stock traders tend to take more significant risks. They usually choose third-class stocks or stocks that have just climbed the stock exchange because they tend to be cheaper than blue chip stocks but potentially experience significant fluctuations depending on market sentiment.

In this way, it is expected that traders will be able to buy many stocks and then sell them when the stocks are experiencing a massive rise.

What should you do before and when should you start it? To avoid mistakes in stock trading, pay attention to the following information!

4 Methods for Investing in Stock

1. Identifying an accurate stock index

Pay attention to the type that the shareholders frequently use. For example, you can choose LQ45 or IDX30, both of which have high liquidity and are supported by high-quality companies.

2. Choose Best Securities

When you want to buy stocks, you will use a stock broker or securities company charged for each transaction. Choose securities that offer a lower percentage of the cost, e.g., 0.20% of the amount of shares purchased. This is done to increase profitability and refine your stock trading strategy.

3. Set Stock Trading Time

In stock trading, there are two approaches: long-term and short-term. In the short-term approach, the risk of loss is greater, but there is a chance of making a profit faster.

On the contrary, if the stock has a good foundation, reputation, and performance, there is a greater likelihood of generating greater profits.

4. Do it carefully

A stock investment strategy works if you have patience. As a beginner, you should start with small capital and increase it with your understanding of the market.

Similarly, when you're losing, be honest and buy shares falling in value to make average downs. When market conditions are stable, you may be profitable. To avoid losses, you must know the risks associated with investing in stocks and the steps you should take before trading.

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