Day Trading & Swing Trading usually requires a lot of capital to start a portfolio. Recently there have been a lot of startups, launching apps & software that makes trading more accessible to millennials & beginner traders. These startups are breaking down the huge barrier to entry into trading, which is capital.
Getting started with day trading [or swing] is now possible with an initial investment of only $50. When I found out the trading was all based on my smartphone, I was a little skeptical at first, but I’ve grown to really like it. Using the Robinhood App, I’m able to place buy or sell orders using my smartphone for free! If you’ve never traded before, you should be aware that brokers usually charge $10 per trade [buy or sell]
Typical Scenario of a Beginner Trader:
Buyers remorse is something all beginner traders will encounter at some point. Usually it will occur when you purchase stock & plan to go long [you want the price of the stock to go up] and it goes down. Immediately you will realize that you’ve made a bad decision and decide to sell your stock. Your real loss isn’t in the decline of price in the stock, but in the commissions you paid to do these trades.
- Purchase 1 stock of $AAPL at $120.00
- $AAPL drops to $118.00 – Buyers Remorse kicks in, you want out! Sell, Sell Sell!
- Place an order to sell 1 stock of $AAPL at $118.
- You take a loss of $2 in stock price
Commissions to regular broker:
- $10 for purchase of $AAPL at $120.00
- $10 for sale of $AAPL at $118.00
- You owe the broker $20 for the trades you placed.
So after covering early, you managed to only take a loss of $2, however you took an even larger loss of $20 to the broker.
Although these fees may seem cheap if you have a large bankroll, I still believe it instills fear in traders as they know they will take a considerable loss if their trade doesn’t go to plan, even if they cover early. I don’t care how rich you are – no one wants to lose $20 each time they make a bad judgement – the loss in stock price is enough for beginners.
Commissions to Robinhood:
- $0 for purchase of $AAPL at $120.00
- $0 for sale of $AAPL at $118.00
- You owe the broker $0 for the trades you placed.
- You take a total loss of $2.
For beginners, no commission is critical as it gives the investor the comfort of knowing that they can get involved in more trades, even if they go south and need to be sold off fast!
Robinhood App offers the basic tools needed to keep track of stocks you already know about. You can view the price of the stock, as well as recent company news articles published.
I’d recommend beginners to use external sources to identify stocks they are interested in investing in as Robinhood isn’t great for identifying investment opportunities. Once you find a stock, add it to your watchlist in Robinhood & make your move when you’re ready!
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