One of the most dynamic and interesting sectors of industry today is the stock market, where you can buy and sell stocks. You can choose to perform the trading yourself or hire a trade broker. This is an individual who handles your orders to buy or sell securities, them being the middleman between you and the stock market.
The term ‘broker’ can be used to mean an individual trader or a company which performs such trades on behalf of their clients. Examples of these companies are Merrill Lynch and Morgan Stanley. It is an alluring career option to choose from today. Do you want to be a successful trade broker? Here are 10 tips on how to accomplish this:
1. Develop A Winning Character
This is the core activity which you should perform if you want to be a successful trade broker. First, you need to be driven and develop the character of a self-starter. Find a way to become intrinsically motivated to perform trades successfully, and learn how to deal with rejection when it happens. Trade brokers work for very long hours and some will even work on the weekends. You must train yourself to have this kind of stamina. Good communication skills are paramount if you want to be a successful trade broker. Moreover, have good time management skills, know how to close a sale and develop the strength to persevere hard times in the market.
2. Get The Right Education
To become a successful trade broker, a bachelor’s degree is required. The most ideal fields of study are business, economics, accounting or finance. A master’s degree is simply a bonus but it is advisable to get one since employers actually prefer candidates who have an MBA (Master in Business Administration). Possessing this level of education allows you to qualify for bonuses, a higher salary and quicker advancement through the corporate ranks. If you desire to manage some client acounts, you have to be a registered trade broker representing your employer. This registation is performed at the Financial Industry Regulatory Authority (FINRA). To register successfully, you need to pass the General Securities Registered Representative Examination.
3. Identify Which Type Of Broker You Want To Be, Then Pursue That Direction
If you are taking up this career in pursuit of prestige, then you can go to work for full-service broker firms. Examples of these are Morgan Stanley and Merrill Lynch. These firms normally have a broker payout of 41%. However, you have to earn a minimum of $650,000 for the firm to get this payout. If you desire a more independent approach to your trading activities, you can work for an independent broker firm such as LPL Financial. In this type of firm, you get a higher payout of 89% to 95% but you have to set up your own office. Last but not least, if you want to work in a low stress and friendly environment, then a discount broker is ideal. An example of such a firm is Charles Schwab Corp (SCHW), where you will earn a flat salary. However, you will gain experience by learning and practicing in a wide variety of investment areas.
4. Understand The Best Times Of The Day To Trade
The most ideal time to trade is in the afternoon. This is from 1:00pm to 2:30pm. During this time, most people are at work and have had a chance of understanding and comprehending the important business news of the day. Moreover, corporate reports and government data is released in the morning. As such, you can use these sources of information to make your trades in the afternoon.
5. Strive To Buy Stocks That Cost More Than $10 Per Share
When you are making stock purchases, strive to buy the ones which cost more than $10 per share. Firstly, those which cost less than this have a higher percentage spread between ask and bid prices. This makes it harder to break even. Secondly, companies whose stock costs less than $10 are much more likely to suffer financial problems, for example bankruptcy.
6. The Best Points Of Entering The Market Are Where The Supply And Demand Are Imbalanced
Just like any other sector of business, if the supply is low, there is high demand. In the stock market, this sends the price of the stocks soaring. Find the best point of entry by studying the historical stock patterns. Once you do this, enter at the optimal point where the price is low enough due to excess supply and yet the stock is about to generate demand and rise in price.
7. Research The Ask And Bid Size Before You Make An Order For Buying Or Selling
As a stock trader, you need to invest in a good system for real-time quotes. Ensure that your system tells you the last price of a stock, its ask price and its bid price too. If the bid price is higher than the sell size, that stock has high demand in the market. It is good to sell it as soon as you can.
8. Set Stock Price Targets And Profit Goals Before You Enter A Long Term Position
In the stock market, there are two general approaches of trading; taking short positions or long ones. If you decide to go long, identify how much profit is acceptable to you and create a stop-loss in case the stock begins to dip. After doing this, stick to your initial decisions and don’t sell even if the price rises to tempting levels. If the stock market is performing well, then you can change your stop-loss level and profit target. Otherwise, stick to your original goals.
9. Focus On A Risk-Reward Ratio Of 3:1 As You Set Trading Targets
One of the most important activities to perform as a stock trader is to set a proper risk-reward ratio. This ratio assists you to lose small amounts and win big ones. By sticking to a risk-reward ratio of 3:1, you can always emerge a winner even if you have lots of small losses on your trades. Over time, you can become much better at trading and begin posting ratios of up to 5:1.
10. Understand The Best Time Of The Month To Buy Stocks
The most ideal time of the month to buy stocks is between the 18th and the 22nd. This period of the month is when stock prices are low due to a low ebb in cash flow from dividend reinvestment and pension funds. On the other hand, the best time to sell your stocks is the first and last two days of the month. Moreover, September and October are ideal months to buy stocks and May is the best time to sell.
Becoming a stock trader is an exciting job option. In the dramatic world of finance, your fortunes can change at any time and turn you into a master stock trader. You can find yourself amassing a portfolio worth billions. The tips above can get you on the right path to stock market success.