To those unfamiliar with the phrase “Stock Trading” and “Stock Trading API”, please don’t take the phrase literally. Trading stock is not the same as trading basketball cards. You don’t say “I’ll trade 100 of my IBMs for 100 of your Intels.” It simply doesn’t work that way. Trading, in the financial markets, means to buy and sell. And stock trading works better with the help of a stock trading API.
It’s important to know all the ropes before you dive into any kind of investment or investment strategy. This article will serve as a beginner’s guide to stock trading and stock trading API. We’ll walk you through some of the best and most effective strategies when it comes to trading stocks.
What is Stock Trading and Stock Trading API?
Stock trader is a term that refers to someone who buys and sells stocks frequently. A stock trader buys and sells stocks and takes advantage of daily price fluctuations. Short-term traders like these bet that they can make a few bucks in the next minute, hour, day or month, instead of buying shares in a blue-chip company.
There are two types of Stock trading and they are:
- Active trading –is when an investor places 10 or more trades every month. They normally use a strategy that highly depends on timing the market and taking advantage of short-term events (based on market fluctuations or at the company level) to turn a profit in the weeks and months to come.
- Day Trading –this strategy is often used by investors that play hot potato with stocks. They buy, sell and close their positions on the same stock in one trading day. (Position is defined as the amount you own of a particular stock or fund). A day trader’s goal is to make money in the next couple of minutes, hours, days, or weeks, based on the daily price fluctuations.
Passive Investing –this is the kind of strategy used by long-term investors. Compared to Active and Day traders, their approach to buying and selling stocks is quite different. Their actions are considered “passive” because they don’t often transact. Rather than mostly relying on technical analysis (like active traders) and timing the market, passive investors rely on fundamental analysis to evaluate a business’ strength and then buy shares hoping they will taste the fruit of the rewards over the years, through share price appreciation and dividends.
What is Stock Trading API?
Application Programming Interfaces or APIs act as a bridge between software applications. Stock trading API enables connection—they act like conduits through which data flows and interact with each other.
Let’s be realistic. As someone who plans on investing money in stocks, you certainly don’t want to lose money. It’s only understandable that investors want to be constantly informed on the current state of the market and be prepared to make trades right away. Just imagine you’re a financial organization that wants to provide its client base the opportunity to trade exchange-traded funds, currencies, and stocks without the need to leave your platform and manage relationships external brokerage firms. In order to do this, you need to know how you can safely integrate with brokers for your users and let them directly and seamlessly make trades with their connected accounts. Look for a company that provides a stock trading API infrastructure that connects retail investors and financial companies with financial brokers online.
Stock Trading API: How To Start Trading Stocks
If it’s the first time for you to try your hand at stock trading through a stock trading API, understand that unless you focus on long-term results, you will be frequently expose yourself to bouts of agitation. Most investors try to keep things simple by investing in a diverse mix of low-cost index funds to reach long-term outperformance. This is extremely important because short-term market fluctuations can be very brutal.
Having understood that, it can be fun and rewarding to learn the basics of how to buy stocks and allocating a small percentage of your investable assets to buying stocks online. But, don’t be complacent. There are a lot of risks involved in stock trading and choosing a stock trading API. Don’t invest or put money you can’t afford to lose on the line. Stock trading API will serve as a temporary diversion where you learn valuable lessons as you work your way around it.
Important Tips for Investing In Stocks
One common misconception people have about buying stocks is that it’s hard. The truth is, it’s actually not. Buying stocks is easy, but the challenging part lies in choosing the companies that beat the stock market consistently.
And this is something most people can’t do. Which is why the Internet is rife with “stock market tips”.
The tried and tested tips below will serve as your go-to guide for investing in the stock market. Go check them out:
- Keep Your Emotions In Check
Warren Buffet once said:
“Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.”
The quote is mostly pertaining to investors who use their head, and not their emotions, when making important investment decisions.
This is where most investors fail—when they let their emotions get the best of them, they end up making costly errors in judgment. Trading over activity due to a surge of emotions is the actually one of the most common ways investors lose money and jeopardize their own portfolio returns.
- Choose Companies Wisely, Not Ticker Symbols
One must understand that behind the stock quotes crawling on the bottom of every TV broadcast is a real, actual business. And it is up to you to choose which of these companies is worth investing your hard-earned cash with. Stock picking shouldn’t be an abstract concept—after all, buying part of a company’s stock automatically makes you part owner of that company.
When you start screening for potential business partners, you’ll be surprised with how much information you’ll come across. It’s easier to focus on the important stuff when you put on your “business buyer” hat. You focus on learning how a particular company operates, its overall standing in the industry, who its competitors are, it’s long-term goals and whether it contributes anything new to the portfolio of businesses you currently own.
- Plan In Advance
Every investor goes through that phase where they get tempted to change their relationship status with their stock. However, making spur-of-the-moment decisions can lead to a common investing mistake: buying high and selling low.
For this reason, journaling becomes a necessity. Yes you read that right. Journaling.
Write down what you think makes each stock in your portfolio worth committing to, as well as the circumstances that would make a break-up definitely justifiable.
- Gradually Build Up Positions
Once you get the hang of stock trading, you’ll eventually learn that TIME, not timing, is King. The most successful investors purchase stocks because they know, and expect, a reward years and decades after. This means you can take your sweet time in buying as well.
Below are three buying strategies that can help decrease your risks to price volatility:
- Buy the “basket” –are you unable to decide which particular companies will be the “long-term winner”? The only solution then is to buy them all! Buying a basket of stocks relieves you of the pressure of choosing “the one”.
- Dollar-cost average –this means investing a fixed amount of money at regular intervals, like weekly or monthly. This fixed amount of money can be used to purchase more shares when the stock price decreases, and fewer shares when it increases. Regardless, it balances out the average price you pay.
- Buy in Thirds –buying in thirds help you avoid soul-crushing disappointments whenever you experience bumpy results right at the beginning. What you do is simply divide the amount you want to invest in thirds, and then choose three separate points buy purchase shares. You can do this at regular intervals (weekly or monthly), or based on company events or performance.
- Try Not To Fall Into Trading Over activity
It’s alright to check in on your stocks once every quarter, especially when you receive quarterly reports. However, it’s hard not to keep checking on the scoreboard. Checking on trading activity regularly can lead to overreacting to short-term events. You end up feeling like you must do something when no action is necessary.
When you notice one of your stocks go through a sharp price movement, don’t just sit there and wonder. Find out what exactly triggered it. Did your stock take collateral damage from the market responding to a totally unrelated event? Are there changes in the company’s underlying business? Is the sharp price movement going to affect your long-term outlook?
The time you spend in learning the ropes of stock trading, choosing a stock trading API and experiencing the ups and downs of the industry first hand, is time well spent. As long as you’re enjoying the ride and not putting out more money than you can afford, then you’re good and moving towards the right track.