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Stock trading is the purchasing and selling of securities in the stock market. Major factors for this decision are to make money out of it through capital gain, dividends or both.
Stock trading has become a lot easier with the advent of online stock brokers that simplified the process into merely signing up an account and depositing money into it. Nowadays, there are even mobile applications where you can do trades, watchlists and other things on your smartphone.
Since Hong Kong is considered one of Asia’s most important financial hubs, many local companies are listed in their stock exchange (HKEX). Many international companies are listed on Singapore Exchange (SGX), so traders have plenty of options for selecting assets to trade with. Check out listed companies here.
Do your research
It is essential to accumulate as much information about the market before entering any trades when you are starting. The more awareness you have of the stock market and specific companies, the better your chances of making money on them. You can do that by reading company reports, following company financial statements, news releases and broker analyst opinions. It is vital to consider that all these sources of information should be seen as suggestions rather than unchangeable facts, so please use your judgement when deciding whether or not a particular trade is right for you.
Be patient
Your investments mature and develop to their potential value over time, so don’t expect immediate results from your trading activities. Do not jump into trades because someone you know mentions good things about a particular stock. If you are just starting, stick with slow-moving companies that have been around for at least five years so you can see how they evolved.
It is important to remember that trading is not gambling because you invest money in the company and hope it has promising futures. There will be highs and lows along the way but if you believe in a company’s potential, continue supporting them until their value increases significantly enough for you to make at least ten per cent of return on your investment (ROI).
There may be restrictions when purchasing shares for Hong Kong stocks. These restrictions may include whether or not the person making the trade has an official account with any brokerage firms, whether the trade is made during open market hours and how many daily sales all individual investors are allowed to make.
Be consistent
It can be tempting to jump from one stock trade to another, but it may reduce the overall profit margin due to high transaction costs. If you have five different broker accounts with five different companies, then each trade will cost you anywhere between HKD 20-35, which means that if your commission fees are 2% per trade, you would have lost 10%-17% of potential gains just by trading too much.
It is better to have a trading strategy and a set of stocks to invest in so you can avoid frequent changes in direction and stick with what makes the most sense for your portfolio. However, it is crucial not to be too conservative because if you accumulate too much money without investing it, inflation will cause its value to decrease over time.
When choosing between two or more stock options, it is always best to go with the one expected to grow at least 10% by the end of the year because that is an actual benchmark that traders regularly use when trying out new strategies. You can then adapt this based on how well your investments perform during their first quarter of investment activity.
Keep learning
It is crucial to update yourself on the latest changes in the market constantly. Read about new regulations that have been introduced, new trends or any opportunities that may arise from rising or falling stock prices. You do not need to become a professional equity analyst, but having a general idea of what’s going on can help you make better investment decisions and make a lot more money over time.