Stock Trading 101 with Robinhood

Intro

Stock trading used to be a very complicated and unreachable to most of the people endeavor. But nowadays with the liberalization of many fields and aspects of our lives through technology anyone can take advantage of stock market and start trading today. Although when or before starting many people have questions. Those questions might seem basic but are nevertheless reasonable. In this article I’ll cover the following questions a beginner or prospective stock trader might have:

  • How much should you invest every time?
  • When to buy?
  • Where to buy? Which platform?
  • When to sell?
  • How to research stocks you’re following, planning to buy or have bought?
  • How to create a watchlist?

Who am I?

I am a self-taught investor. I’ve been investing for 3 years having started with just a thousand bucks invested in Tesla. Within 8 months I got a 60% return on that investment and then I sold it. That got me hooked and over the last 2 years I’ve been investing more seriously and slowly. I’ve been growing my portfolio with an influx of capital every month (I’ve invested an additional $500 each month) and I’ve made successful trades every other month.

I was also interviewed by CBS (a San Francisco local TV channel) about micro stock trading.

As a software developer, I try to apply my knowledge and deep immersion in the tech field to guide my decisions on sales and purchases I make on the stock market. I invest in Tesla, Solar City, Facebook, Google, Amazon, and similar tech companies.

How much should you invest every time?

The answer to this question depends on how much disposable cash you have and what your current portfolio looks like. In any scenario don’t put all your eggs in one basket. Try to diversify your portfolio by investing in chunks. Say you have $6k to invest: I’d split it into 6 parts and invest $1k in 6 stocks.

Personally, I try to invest $500 each month so that I can invest around $1k in an opportunity every 2 months if I see one coming. Don’t stress too much about how much to invest as long as you invest a comfortable amount for your budget.

When to buy?

It’s simple: buy when you see an opportunity. I typically buy a stock when I see it drop significantly after a news event, a rumor or a failed quarterly report.

Another good time to invest can be if you know a stock will go up in the long term and you are willing to sit on it for at least six months to a year.

A lot of people buy only after quarterly reports in the hope that there will be a temporary downturn and a quick recovery for their chosen stock’s price.

Where to buy? Which platform?

This depends on the requirements you have. The simplest for beginners is Robinhood. If you are an experienced trader and need more features, however, go with a broker company such as TD Ameritrade.

The advantage of Robinhood is that it’s easy and fast to start and there’s no commission on trades. You can open an account with as little as $100 (or even less). On the other hand, Robinhood has limited features and won’t let you trade futures or set up complex trade conditions other than limited orders.

With TD Ameritrade or a similar brokerage firm you pay a commission on your trades but you get a broad scope of features in return. These companies have lots of tools to research and find data about investment opportunities and they offer trading with futures as well as more complex trade conditions than limited orders.

When to sell?

How greedy are you? Ultimately, it’s up to you when to sell. Some people put a 5% cap on increases or decreases in the stock price. They buy or sell when the price goes above or below that cap. Other people play a long game and wait for stocks to raise ~60% before selling. They can make big profits this way but they might miss out on short-term profitability. Which of these strategies you choose depends on your preference, guts (how much you’re willing to loose or sit out), and whether you’re a day trader or long-term trader.

How to research stocks you’re following, planning to buy or have bought?

My approach here is to only trade stocks in the field that I am very familiar with. I’m a software developer so I invest in tech, including stocks such as Amazon, Apple, Tesla, Google and Facebook. This is the field I live in and understand the best. When there is news that I know is going to be big, such as Amazon coming up with the Amazon Go concept, I know it’s a good time to invest. If I’m willing to wait, that investment will grow.

Another option is to do extensive research on a company and look at their financial performance and quarterly reports over the last few years. It’s also smart to review any news they’ve been in, who’s in charge of the company, and the product they make. If you can, actually try that product because it would give you a better feel for what it is and how it would potentially perform.

The bottom line when investing is that you should pick a field or company you are intimately familiar with or do extensive research. Better still, do both.

How to create a watchlist?

Creating your own watchlist isn’t that complicated and boils down to how do you do your research and what companies you are following. As was discussed in the previous section my advice is to follow companies in the field you’re familiar with. As for the tools to use there are myriads of stock watchlist applications and websites, pick the one you like the most. I typically just stick with Apple Stock app, Yahoo Finance, Seeking Alpha, and Robinhood. The main thing to consider is how often you’d want to be notified about price changes and news.

Conclusion

It isn’t that hard to start stock trading as it used to be and nowadays modern tools like Robinhood and other apps helps us do it seamlessly and almost effortlessly. If you always wanted to trade stocks or considered investing your savings more proactively then give stock trading a chance.

I was a beginner at some point too and I know the struggles you might be going through in the beginning so feel free to reach out if you have any questions. I’ll help as much as I can.

P.S. if you have any questions about stock trading or Robinhood feel free to reach me at alex.bush@smartcloud.io or leave a comment below.