Stock Market Trading Methods For Beginners To Determine Risk Tolerance


For beginners, the best ways to invest in stock markets can seem daunting. There are so many different investment terms, concepts and strategies. How is any new investor supposed to keep up with them? Fortunately, you do not have to learn everything at once to invest in the stock market successfully. In fact, many experienced investors are specialized in a single type of investing like companies with higher stock prices. To decided which are the best ways to invest for you, we will go through several of the popular strategies for investing in the stock market.

Before deciding to invest, a new investor like yourself must take the time to understand how stock investments work. Firstly, new investors must  determine their investment goals and expectations for returns. The, they must evaluate how much risk they are willing to take in order to achieve their goals. In stock market investments, there is always risk to be carefully considered. Once goals and risk tolerance is established, a new investor can either open a new brokerage trading account online or with a stock brokerage. Finally, a new investor is ready to start using some of the best ways to invest in stocks.

Diversified Portfolio Investments

Investing in a diversified portfolio is one of the most highly recommended ways to invest in stocks. Investors can choose three to four mutual funds, Exchange Traded Funds (ETFs) or index funds, investing small amounts in each. The diversified portfolio keeps investing costs manageable and limits the risk.

Value Investing

Value investing is another way to invest in stocks. To value invest, an investor buys a lot of low cost shares of established stock to keep for the long term. For example, several established companies like Forbes and Bank of America offer stocks for under $10. Or, you can buy Intuit stock for a more. Buying a lot of shares at lower prices can be held for the long term with hope to gain significant stock price value.

Forex Trading

Foreign currency trading (FX or Forex) is also a popular way to invest. Although investing in Forex is not the same as the stock market, it does offer a low entry price. In Forex trading, the investor gains the interest rate differential and benefits from the value in the exchange rate. However, the investment can be lost due to fluctuating currency values.

Target-Date Fund Investing

Investing in a target-date fund is a best way to simplify stock investment, enabling diversification through one single fund. A target-date fund holds positions in various funds. By investing in one fund, the investor would be still be investing in five or more funds, making stock management easier, and risk lower.

Options Trading

Options trading is an advantageous way to invest in stocks. In options investing, an investor can control a stock without owning it. Also, options trading can be done to keep risk at a minimum. Or, it can be used to leverage positions that can be extremely risky. Either way, the investor needs to understand options trading well to gain from the investment.

Penny Stocks Investments

Buying penny stocks is an aggressive way to invest in stocks. Penny stocks are very cheap to buy. As a result, investors can buy various stocks in large quantities,  hoping that one or two might bring tremendous gains. Keep in mind, penny stocks are cheap for a reason and you get what you pay for even in penny stock investing.

Futures Trading

Futures trading is an investment method for speculators. It  is very attractive to new investors because it can yield larger gains from small investments. However, this is high risk trading. Any investor really needs a good understanding of futures trading before getting started. A safe alternative is to invest in very small futures stock accounts.

CD Investments

Finally, traditional Certificate of Deposit (CD) are a safe way to invest. CDs offer steady interest returns on fixed and variable interest rates. Although, most CDs have fixed time frames and the investor can only withdraw after the time expires. Similar to investing in stocks, the investor has the option of opening a no penalty CD, allowing the investor to access their cash at anytime.

Trading For Beginners

If there is one tip you need to know for effective stock market trading, it is to practice! There are many trading simulators and investment simulators available online on many of the best online brokerage platforms for novices. Take advantage of these simulators. They will allow you to learn the basics of trading in the stock market, so that you can hone your skills without losing any money. You will be able to identify areas of weakness you have, such as too low a tolerance for risk or a tendency to trade with your emotions, and improve upon them. If you want to learn how to trade in the stock market, use an online trading simulator for practice. You will not regret it.

Depending on who you ask, there are many best ways to invest in stock markets. However, the investment methods listed above are used by successful investors around the world. Each way has its own risks and rewards. Depending on goals and risk tolerance, it is up to you to determine which stock investing method works best for you.

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