A guide to Trading Stocks, for under $1000
In this article, I’d like to explain how to get started with trading stocks. I’ve always been interested in trading stocks, but getting started seemed like such an insurmountable hurdle. In addition, I would like to detail my theories about stock trading, and how I am using those theories to make money.
Getting started was actually easier that I thought it would be. The most difficult part was comparing the different stock trading options available and trying to pick the option that would cost me the least amount of money. The service that I landed on was Robinhood, for the simple reason that it lacks the $10 cost per trading transaction that many other services do. A trade without a $10 commission allows me more flexibility in trading, because I don’t have to make up that $10 in profit. After linking my account to Robinhood and transferring some money over, I was ready to make my first trade. But first, I had to figure out my philosophy for investing.
This initial three month period was a passive attempt at understanding how the market feels to a stock trader. While keeping track of my results, I made no hasty decisions and promptly reaped the fruits of my labor, earning a 15% return in three months. My investing philosophy, while continuing to change and grow currently has four parts:
- Only invest in areas you know
- Invest in solid areas that have value, and a high barrier to entry
- Don’t make rash judgements. Have a price where you enter, a price where you sell and are happy, as well as a price where you sell if things go south.
- Diversify. Don’t have all of my eggs in one basket, but also be prepared to ride a positive wave, if need be.
Using this theory, I am currently invested in three stocks: Under Armor (UA), Twitter (TWTR) and Advanced Micro Devices (AMD). So far, AMD has been the big winner for me, but I am currently in the green on all three stocks. My thinking for each stock purchase is as follows:
UA: I wanted a retail company in my portfolio. UA has contracts with some of the biggest, youngest names in sports such as Steph Curry and Bryce Harper. In addition, with the NBA Finals coming up I thought that Under Armor would receive a huge boost to their sales if Golden State won (spoiler: they didn’t). Overall, I am currently not too thrilled with their performance so far, but I’m still in a holding pattern.
TWTR: I’m very much a tech guy, and I think Twitter is highly underrated. Multiple different subcultures have their primary interaction on Twitter (NBA, media, etc) and until that goes away, Twitter is still an incredibly valuable company. In addition, Twitter stays on the cutting edge of breaking news stories, and individuals Twitter handles are still displayed across television. All that the company requires is the correct vision, but failing that I think an acquisition to the company is increasingly likely.
AMD: As a student of technological forces, I believe that everything will be connected. What was once dumb will become smart. Secondly, I think that Virtual and Augmented reality are only had going to become more and more common in society. Investing in AMD allows me to take the position of selling supplies to the gold miners, and thus is a good investment for the future.
As discussed above, I now have the tools to trade stocks, and a working theory about how to approach my trades. From here, I’ll work on maximizing my trade value as well as avoiding costly mistakes. In the next installment, I’ll focus more on the selling aspect, as well as check up on my progress.