It’s highly recommended that you spend some of your free time trying to earn more money. Doing this will help you be in a more financially stable position as you combine these side-earnings with your primary source of income. Therefore, you have more money to use as you please.
These extra earnings can go into a savings account, be used to invest in a business idea, or just give you a little bit of added financial freedom.
When it comes to money-making methods, there are plenty to choose from. As it happens, trading is one of the most popular. Loads of financial experts say that trading is the best way to earn additional income, but is this really the case?
Today’s post will take a look at whether or not you can actually make money from trading in your spare time. To start, we need to define what this means!
What is trading?
Trading refers to when you buy and sell things for different values. More often than not, we concern ourselves with stocks and shares. You can purchase stock, then sell it for a profit when the market price increases. As a concept, it’s relatively straightforward and easy to understand.
How do you make money from trading?
After seeing the definition, it’s relatively easy to see how you make money from trading. It’s just a case of buying something for a low price, waiting until it increases in value, then selling it to make a profit. Your success will vary depending on how much the stock increases and how much you bought it for. But, in a general sense, you can definitely make money from trading in your spare time.
At this point, you might think this is the end of the post as the question has been answered! However, not everyone will make money from trading. It’s a lot more complicated than it seems when you read the definitions above. In fact, plenty of people do the complete opposite and lose money from trading.
Bearing that in mind, it’s vital that you learn the right things to do when trading. If you follow the golden rules, then you will start to earn more and more money in your spare time.
The golden rules of trading
This section is crucial as it can teach you how to trade with a higher chance of success. Below, you’ll find all the main rules to live by if you want to make regular profits from trading stocks.
Choose low-risk stocks
First of all, you will find there are so many different stocks that you can invest in. As a result, there are some that present bigger risks than others. One of the critical rules of trading is to choose stocks that are very low-risk entities.
What this means is that they’re not going to cause significant problems if things go wrong. A great example of this is a penny stock. Penny stocks are incredibly cheap stocks that can be very volatile.
As a result, they can dramatically increase in price and decrease substantially. However, due to their cheapness, if they drop in price, it’s not an issue as you won’t lose a massive fortune.
You can learn more about them online, but the general idea is that these are low-cost stocks that won’t have a severe impact on your finances if they don’t increase in value. Take this concept and apply it to all the different stocks and shares out there.
Only trade ones that aren’t too risky! As another example, don’t buy loads of expensive stocks that are extremely prone to dropping in price. If this happens, then you’ll lose loads of money.
Buy low, sell high
The fundamental rule of trading is to buy low and sell high. Find stocks for as cheap as can be, then sell them for as much as possible. This often means you have to hold onto your investments for extended periods until they rise in price. Following this rule enables you to widen your potential profit margins and make as much money as can be. If you buy high, then it’s harder to sell for a higher price; simple.
Set aside a trading pot
A trading pot is basically a metaphorical pot of money that’s used for trading.
The idea is that you don’t keep dipping into your main bank account to use that money when trading. By taking the cash out and keeping it separate, it prevents you from spending more money than you can afford.
It limits the amount you can trade with, which reduces the chances of a massive loss coming in where you spent way too much and saw terrible returns.
Follow the economic news
Lastly, it’s essential that you stay up-to-date with the latest financial news. The stock market is pretty much fuelled by what happens with the economy. As an example, when there’s a recession, the market can completely crash, and all prices drop.
On the flip side, when the economy is booming, stock market prices shoot up. Many little things can happen that impact whether or not certain stocks will increase in value. If you want to make money from trading, then you have to follow the news and listen to what financial experts say.
It’s well worth getting news apps on your phone and setting up alerts for new updates/stories. This can help you identify when things are going good or bad.
Conclusion: can you make money from trading?
To conclude and wrap everything up, we need to answer the initial question. Well, as mentioned earlier, the answer is yes. You can definitely make money from trading in your spare time, but you need to follow those golden rules. If you choose low-risk options that are affordable – and sell them for profits – then you can make a pretty fortune.
Stay updated with the latest stock market news, and you will remain on top of things as well. If you don’t follow the golden rules of trading, then you won’t make money at all.