How to Trade Stocks and Invest in Stocks for Beginners

How to Trade Stocks and Invest in Stocks for Beginners - Investing in shares is more accessible than most people imagine. Beginners can try many ways of trading shares, such as online trading via personal smartphone. The information available can also prepare you as you study market patterns and conditions. It's always possible to start trading shares.

What is the Difference Between Stock Trading and Stock Investment?

In the world of shares, there are many terms that the lay public may still need to understand. So, novice investors should diligently learn and seek as much information as possible before investing.

One of the terms most often encountered at the start of saving shares is stock investment and stock trading. What is the meaning of stock investment and stock trading? And what is the difference between the two? Let's look at it together below.

What Are Shares?

Before we understand the meaning of stock investment and stock trading more deeply, let's start by first understanding the stock itself. Shares are proof of company ownership, a claim on the company's income and wealth.

This means that when you buy a share, you automatically become one of the company's owners, and you will also receive a share in the profits from the company.

What is Stock Investment?

So, stock investment can be interpreted as investing capital in companies registered on the Indonesian Stock Exchange and buying and selling their shares. Investment is passive. This means that you, as an investor, do not run the business directly; you only invest a certain amount of funds, which are then managed by the company concerned.

Just like doing business, apart from getting benefits, investing in shares may also not benefit you. Therefore, it is essential to recognize and know information about the company you are investing in before deciding to invest.

By managing risk factors well, you will have a more significant opportunity to receive benefits from your investment.

What is Stock Trading?

Stock trading means buying and selling shares by taking advantage of daily market price fluctuations. If you are more passive in stock investing, you will be more active in stock trading. This is because, as a stock trader, you will analyze the market and decide on the best time and price to carry out stock transactions.

That way, you can get the best capital gain from the price difference that occurs when you buy shares and when you sell them.

For greater clarity, below we will explain what are the differences between stock investment and stock trading:

1. Principle: Buy and Hold vs Buy and Sell

A stock investor tends to adhere to the buy-and-hold principle when investing in shares. This happens because stock investors usually invest their capital in long-term plans.

Stock investors tend not to care too much about the daily rise and fall of share prices. This period is uncertain; it all depends on each investor. However, he invites investors to his theories when his theirestment objectives have been met.

Meanwhile, a stock trader adheres to the principle of buy and sell. Traders will buy shares at a specific price and sell them within a relatively short period as long as the share value is within the range desired by the trader. Traders usually expect higher benefits than regular investments.

2. Fundamental Analysis vs Technical Analysis

Because a stock investor tends to invest his capital for the long term, the analysis used by an investor is a fundamental analysis of the company.

Company fundamentals are essential information about the company, such as its financial reports, company performance, the rate of development of its shares over a certain period of time, and others that can be used to assess the company's performance in managing its business.

Investing capital in companies with good fundamentals will reduce the risk of loss for investors.

Meanwhile, stock traders usually do more technical analysis. This analysis can help traders see stock movements in the short term.

Trading is more sensitive to market sentiment and conditions than company fundamentals. Therefore, the analysis of all risk factors must be more thorough and detailed.

3. Risk

The next difference is risk. If you look at the risk, both investing in shares are much lower when compared to trading shares. Because the risk is lower, the results obtained also tend to be lower when compared to stock trading.

Stock investors tend to be more selective in choosing companies that will receive their investment. Usually, investors prefer blue-chip companies that are well-known and proven to have good fundamentals.

Meanwhile, stock traders tend to have higher risks; traders usually choose class three shares or shares that have just been listed on the stock exchange. Traders choose these companies because share prices tend to be cheaper than blue chip shares but have the potential to experience high fluctuations depending on market sentiment.

That way, the hope is that traders can buy large quantities and sell them when the shares experience a significant increase.

So, what do you need to do when and before starting? Pay attention to the following information so you don't make the wrong move when trading shares!

4 Ways to Invest in Stocks

1. Determine the Right Stock Index

Get to know the types commonly used by stock players. For example, you can choose LQ45 or IDX30, both of which have high liquidity and are supported by trusted quality companies. LQ45 is a market index on the Indonesian stock exchange, which coconsistingompanies. Meanwhile, IDX30 is one of the 30 stocks with the highest liquidity.

2. Choose Appropriate Securities

When buying shares, you will use a securities company or stockbroker who requires a fee for each transaction. Choose securities that offer a lower fee percentage, for example, 0.20% of the share purchase amount. This is so that profits are more optimal and to ensure that your stock trading method is perfect.

3. Plan the Stock Trading Period

There are two ways to trade shares based on the period: long-term and short-term. In the short term, the risk of loss is greater, but there is a chance that profits can be obtained more quickly.

On the other hand, there is a chance of getting more enormous profits if you trade shares in the long term. Suppose the stock has a good reputation, fundamentals, and performance,

4. Do it with patience.

Any method of investing in shares will only be effective if patience accompanies it. As a beginner, it is recommended that you use small capital and increase the amount as your understanding increases.

Likewise, face a loss with a clear mind and average down by buying shares whose value is falling. It could be that you experience profits when market conditions stabilize again. Before trading shares, you also need to know the risks and appropriate steps when investing in shares so as not to cause losses.

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