Is stock trading suitable for me?

by Peter Marsden
(Leeds, UK)

The answer to this question often depends on two things. Firstly, having some risk capital is very important. This is basically money they you can comfortable afford to lose without it significantly affecting your financial health. Secondly, you need to have an appetite for risk. This means you need to be comfortable with the possibility of your investment value going down as well as up.

To get started with stock trading you do not need to have a lot of risk capital. A few hundred dollars is quite enough to get started with some stock brokers.

Generally speaking, the lowest risk stocks to trade are blue chip stocks. These are stocks in company's that have been a round for a long period of time, often even decades and have shown steady consistent profits year in year out. Examples of these companies include the oil giant Exxon Mobil and Walmart.

Traders who seek higher returns may look to smaller capitalized company's or even penny stocks. These stocks can be extremely volatile and significant gains and losses can occur in a very small space of time. You also need to be careful when choosing a penny stock broker. Many brokers have extra fees for penny stocks.

The stock market really is not the place you want to be if you are desperate for money and looking to get rich quickly. There are traders who begin trading with this mentality, but unfortunately it almost always ends up in complete disaster. Stock trading requires discipline and patience and is by no means a get rich quick scheme by any stretch of the imagination.

Before trading stocks on a live trading it is very important to take sufficient time to learn how to trade stocks. Trading on a virtual trading account for a period of time prior to trading live is often highly advisable.

If you are able to accept that trading stocks does have a degree of risk and it is possible that you will lose some of your trading account or even all of it, then it may be time to look at your tolerance for risk.

Some traders are prepared to take on a high level of risk with the goal of making a high return. Other traders are more conservative, with the main goal of earning modest returns whilst keeping risk as low as possible.