The traditional “one way street” of making money from buying and holding stocks, and profiting as they go up in value may be the traditional route to making money from financial markets but now we are now also to make money from trading them.
In fact, trading stocks holds many advantages over the old “buy and hold” method. It gives us the extra opportunity to profit from correctly speculating whether a stock goes either up or down in value. It also means that we can make money from the movement of the stock without actually owning it!
Here are 5 reasons why it pays to trade stocks
Fewer barriers to entry
Once only the preserve of the “big guns” in the market, anyone can now have access to a selection of thousands of trade stocks, from as little as $1000. All you need is a brokerage account and an internet connection to trade from the comfort of your own home.
Reduced risk exposure
From trading in the way of a professional trader, we are able to trade responsibly by keeping the risk low. By risking no more than 1% per trade, we can safeguard against unforeseen losses if market simply goes the “other way”.
Instead of tying up a significant sum of money in one stock for it to only remain dormant for a long period of time, trading gives us the added benefit of being able to enter the same position and enjoy the same profit potential, but from risking far less money as we would had we invested it. The associated costs for entering and exiting positions is also typically less.
In the UK, there are many tax advantagesto trading. If you “spread bet,” it means the government cannot tax you on your winnings in the form of Capital Gains Tax (CGT). Furthermore, there are similar tax advantages if you trade inside the wrapper of a SIPP or ISA.
Anyone can learn it!
Believe it or not, many of the best and most successful independent traders and fund managers in the world started out with zero knowledge. In fact, many are living proof that you do not need to be scholastically gifted or a member of the “inside circle” of the banking elite in order to succeed. They did, however have a key unifying trait: they had a raw determination to succeed and they attribute much of their success down to their own mistakes and the help of their mentor.
The founding partners of Trade-Vest are no exception. They began their careers in very different fields before coming together and determining the right strategies and tools that work in both trading and investing.