Thanks to the development of the internet, in recent years the stock exchange has become increasingly digital and it is now possible to play the stock market from home. All you need, in fact, is a computer (or tablet or smartphone) and an account with one of the many existing online brokers. Obviously, it is still possible to invest in the stock market in the traditional way, that is, relying on an advisor or opening investment funds in the bank.
When we talk about playing the stock market from home we generally refer in particular to trading with CFDs (Contract For Difference), which allow us to invest in any market and to exploit the leverage, although obviously they are not the only form of investment that can be implemented. So let’s see how to play the stock market from home, what are the best brokers and the advantages and risks of this activity.
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How to Play on the Stock Exchange
It is important to point out that the term “play” can be misleading and that is why insiders do not like it very much. In fact, investing in the stock market is far from being a game, because the risk of losing money is there and it is concrete. Before starting to invest any amount of money is therefore better to be prepared and study. From a technical point of view, however, start playing the stock market from home is quite simple and fast
If you decide to invest in the traditional way, you will need to open an investment account at a bank or other appropriate entity that will serve as a digital wallet. Then, you can buy the desired shares on your own or rely on an advisor.
If you decide to trade online, the first thing to do is to open an account with one of the many brokers available online. The advice is to rely only on verified platforms, which have received the approval of the various supervisory authorities. The majority of online brokers guarantee free registration and offer a demo account to practice on.
Once registered, the online trading platforms will ask you to upload your documents and from this moment you will have to wait a few hours for your account to be approved and activated. Once the account is activated, we will have to deposit a minimum amount of money if we want to start immediately with a real account (usually the minimum deposit is between 50$ and 100$), or we can start playing on the stock exchange right away with the demo account.
Whether you decide to use virtual or real money, the steps to start with the first investment are the same:
- Decide on the type of market to invest in.
- Choose the desired asset.
- Set the amount of money to invest and the multiplier. Even if you are acting with the demo account, the advice is to go cautious with the leverage, so that you can realize how powerful and risky this tool can be at the same time.
- Choose whether to buy or sell the amount of shares you select.
- Decide whether to set Stop loss and Take profit thresholds.
- Once all these steps are done, you will find the stock you just bought in your portfolio, with the position you chose (“buy” or “sell”) and your percentage profit or loss in real time.
Before proceeding to buy any stock, however, it is a good idea to study the charts and the trend of the asset under consideration. There are several ways to do this, but most traders use technical analysis, which is based on chart study, or fundamental analysis, which also takes into account factors outside the market, such as news, rumors and natural events.
Benefits and Risks of Investing
Although CFDs and classic stocks are two different things, contracts for difference replicate the performance of stocks, so the possibility of loss or gain is almost the same. In any case, however, some of the advantages and risks of playing the stock market from home are different from those of investing in the traditional way.
By deciding to invest from home, the advantages are several:
- The amount you need to start can also be very small.
- You have full control over decisions.
- Thanks to the trading platforms, you have access to stocks and assets from all over the world.
- Transactions are fast and simple.
However, playing the stock market from home also has several disadvantages. The first one is definitely that of losing a lot of money, especially if you start investing without the right preparation and strategy. Moreover, although it is true that transactions are fast, as well as the technical process to invest, it is not an activity to be taken lightly. As mentioned, minimizing risk requires a lot of preparation and study of the markets and charts, and this cannot be done sloppily.
How much you can earn
We have mentioned that it is possible to start investing even with very low amounts, such as $50 or $100. This is possible because of leverage, which allows you to be exposed to more money than you actually have. In fact, therefore, the multiplier is a tool as powerful as it is risky.
The chances of gaining or losing money increase a lot if you decide to trade, especially on CFDs. Everything then depends on the quality and quantity of your trading.
Once we have finished our trading, we need to consider the costs and commissions of online trading platforms. Although it is true that most platforms offer free registration and account activation, you can decide to upgrade your account to get better trading conditions or additional services.
Very important and consistent, then, are the trading costs, which include:
- Spreads, which is the cost that the broker applies to the transaction once it is opened.
- Buying commissions, although these are generally applied by banks. eToro, for example, does not apply them on most assets.
- Overnight commissions, which is the fee paid to keep the position open for the next day as well. These can be substantial over the weekend.
- Withdrawal fees, when you decide to withdraw your money. eToro charges a fixed withdrawal fee of $5, while Plus500 offers 5 free withdrawals per month.
Play the Stock Market with a Demo Account
Most major online trading platforms offer a demo account through which we can invest virtual money without the risk of losing capital.
Demo accounts are very useful tools especially for beginners and for testing trading strategies. In fact, they replicate exactly the real market trend and the tools available to carry out the necessary analysis are the same as those offered with a real account.
The virtual money made available by the various platforms is obviously quite high, for example Plus500 offers $100,000 virtual. This is not by chance, as this gives you plenty of room to practice. Playing the stock market from home with a demo account is therefore absolutely recommended before investing real money.
The Best Platforms
The choice of the platform on which to operate is a fundamental step to start playing on the stock exchange independently. Let’s see what are the best trading platforms of the moment.
Surely, the most famous and used is eToro. It is an Israeli platform founded in 2007 that today has offices in Cyprus, Israel, United Kingdom, Australia and the U.S. eToro offers a free demo account, free registration and the ability to take advantage of the copy trading function.
Plus500 is also one of the best known and most popular trading platforms. It too offers a demo account as well as some of the lowest commission charges and spreads on the market.
Another widely used platform globally is XTB. Among the many tools available to users, XTB also offers a trading learning environment, the Trading Academy, where courses, articles and other resources can be found for any level of expertise.
Mistakes Not to Make
To conclude this analysis, after recommending the best platforms for online trading, here are some of the most common and risky mistakes not to make if you decide to play the stock market at home.
1. Investing more than you can afford
First of all, you need to be aware of your budget. Leverage could lead you to expose yourself to more money than you can pay back. Therefore, it is important to set a budget before you start and make sure you never exceed it.
2. Don’t diversify
Never bet everything on a single asset, or on several securities from the same sector. The best solution is always to diversify our portfolio as much as possible, so as to minimize the risk and be able to cover the losses brought about by unfortunate or mistaken trades with the gain of those that went well.
3. Playing on the stock exchange before you have studied and practiced
We want to emphasize again, first of all online trading must be studied and practiced. Although the initial deposit may be low, it would be useless and risky to start investing in the stock market with real money before you have the right knowledge and skills.
4. Thinking of becoming rich immediately
Phantom stock market gurus and fairy tales about infallible trading robots have led many people to believe that trading is a game with which they can make money quickly and easily. There is nothing more wrong than this: playing the stock market is a very serious activity that requires time, effort and experience. Earnings will come only after time and commitment.