All You Need to Know About Investing in Stocks

What many successful companies in the world today have in common are shareholders. These shareholders are people that own stocks,  pieces, or shares of ownership of a company,  in a company. Each stock is worth a certain amount of money based on what the company is worth. 

What are Penny Stocks?

These are stocks that trade under 5 dollars ($) per share. Before the U.S. Securities and Exchange Commission modified the definition of penny stocks, they were always considered any stocks that traded for less than 1 dollar ($) per share.

Many stock traders consider penny stocks bad for business since most of the companies that sell their stocks under 5 dollars are small companies that use the promotion strategy to lure the public into buying shares. As soon as they have enough data collected from the stocks, they quickly end the promotion; hence, the stock value drops, which results in losses for the shareholders.

What is Day Trading?

A day trader, in simple terms, is a person who is focused on buying and selling stocks on a day-to-day basis. A day trader capitalizes on buying and selling stocks, currencies, or futures and options within the same trading day, meaning they close all trades before the trading day ends and hold no open position overnight.

The main objective of a day trader is to take advantage of the price fluctuations in stocks. The more volatile the market, the more favorable the conditions are for a day trader. Typically, day traders will buy a stock and sell it immediately when the value goes up a little bit.

For any first-time trader that is looking to start, the essential question would be: what could be the best trading platforms? Here are the three best trading platforms that any trader should look out for:

• TradingView: This platform is web-based, easy, and intuitive for beginners. TradingView has real-time data and browser-based charts that let you do your research anywhere, even on the go. To check out this platform, just open TradingView on any modern browser and start charting, exploring, and sharing trading ideas.

• MetaTrader 4: This is by far the most popular platform for retail forex brokers. It is also known as MT4 by many of its users. It includes so many features that make trading and market analysis so easy, i.e., the navigation window, the market watch window, the indicators window, automated trading, and so much more. To check out this platform, download its free software for either Windows, Android, or iOS operating systems.

• Thinkorswim: This is one of the most popular platforms that allow you the ability to trade stocks, options, penny stocks, along with futures. It’s the best for beginners and advanced traders looking for a swift platform to settle with. Their charts, filter studies, and scanners are top-notch in the industry. The platform is entirely free, and you can download it from any open browser.

What stocks should you invest in? 

Investing in the right place is what every trader aims at achieving. These are the four significant metrics that may help know which stocks to invest in:

• Economic moat: It is always wise to invest in a company that has a competitive advantage over its competitors. These economic moats to watch out for can be in terms of Brand name, Trade secrets, Economies of scale, Network effects, and Cost advantages.
• Profitability: You can always tell where to buy stocks by asking yourself if the company you want to invest in is profitable. You can tell if a company is profitable by measuring its Return on capital or by getting this information from online sources like www.morningstar.com.
• Price: When you are looking for a stock to invest in, you must avoid paying too much for a stock. To measure if you are paying a lot for the stock, you are trying to purchase, use the PE ratio. A low PE ratio is always a better investment than a high PE ratio.
• Debt: As long as you are looking at purchasing stock, you may need to check how much debt the company you are about to buy from has. Companies with huge debts are most likely not promising avenues to invest in instead of those without huge debts. Information about any company’s financial status can also be accessed from Morning Star. 

With all that has been mentioned above, it’s wise to disclose that investing in stocks also comes with its associated risks, including: Economic risk, Inflationary risk, Market value risk, and Risk of being too conservative.