You don’t necessarily need to buy and sell shares every day for a chance of defining yourself as an official stock trader. You generally will need to make more moves than the standard investor – who is more focused on gaining long-term profits than short-term wins. Here’s what you really need to know about stock trading.
Defining the Average Stock Trader
The average trader isn’t always the caricature people imagine – of someone running around in front of monitors on Wall Street, grabbing people to buy and sell as quickly as possible. Although there is a lot of specific timing involved, most people manage their portfolios online these days, using tools like brokerage accounts and apps. To be classified as a genuine trader you’ll need to buy and sell multiple assets per year. This doesn’t include paper trading, where you practice your strategies without spending any money, using a demo account. While using this tool will make you more effective in your strategies, and could reduce your chances of wasting money, it won’t turn you into an official trader.
If you are in the trading landscape, you’ll often fall into one of two camps. The first option is active trading which is generally when you move in and out of around 10 positions in one month. Although the number required differs depending on who you ask, the idea is that you’re actively looking for opportunities to make money based on short-term events. If you want your portfolio to move even faster than that, you can pursue the second camp – which involves day trading. This is the strategy that involves moving in and out of positions on a daily basis. In general, you won’t leave any positions open overnight.
Do you Need a Lot of Money to Get Started?
Thanks to tools like paper trading accounts and online apps, you don’t actually need any money to begin looking into the markets these days. You can experiment, develop your skills, and make sure you’re comfortable with your plan for how you’re going to make money before you start spending anything. This is often a good strategy if you’re new to the space.
Of course, the actual amount of cash you’ll need to earn your position as an official trader will depend on who you ask. You’ll need a brokerage account to begin making trades, and although a lot of these come without required minimum orders today, some still have specific rules on how much money you need to have available in your account before you can begin trading. Fortunately, knowing your risks and assessing your financial standing carefully should help you to decide what kind of trading you want to do.
