Be Your Own Broker


If you have some extra cash, investing is a great way to have your money work for you. Trading on the stock market can be extremely profitable, allowing you to turn a profit much quicker than some other forms of investment. Keep reading to learn more about stock trading and some strategies for doing it successfully without a broker.

An Overview of Stock Trading 

Stock trading is the practice of purchasing and selling stocks so that you can make money off of fluctuations in their prices. Most of the time, the hope is to turn a profit in the next day, week, or month, so it’s not necessarily a long-term investment strategy.

There are two basic methods for trading stocks: exchange floor trades through the New York Stock Exchange or trading on an electronic market, like the NASDAQ. Electronic markets have become the norm, allowing you to buy and sell stocks online from anywhere in the world.

How Can I Trade Stocks? 

You have several options available to facilitate the process of buying and selling stocks, all of which come with their own set of advantages and challenges. To trade stocks, you can use one of the following:

  • Full-service broker: A full-service broker is a professional who develops strategies to help you meet your financial goals. Aside from helping you with your trades, they can also give you guidance about estate planning, retirement planning, and budgeting. They are very helpful when you’re first starting to trade stocks, but their service and expertise comes with substantial commissions and fees.
  • Discount/online broker: An online broker is a sort of compromise between using a broker and handling trading yourself. The service is significantly cheaper, though you get little to no personalized assistance. There are helpful links and resources available for you to use, but you manage your own investments for the most part.
  • Direct stock purchase plan: If you’d prefer to trade stocks yourself, you can use this type of investment plan. Using a DSPP, you purchase shares directly from a company, which requires much less in fees.

Tips for Stock Market Success Without a Broker

Image via Flickr by free pictures of money

If you decide to be your own broker and trade stocks for yourself, you should use a few key strategies to ensure that you’re making wise investment decisions. When searching for good stocks, you should:

  • Find growing companies. To make sure that your investment is likely to yield a high return, you should take a look at the company’s past and future earnings growth rates.
  • Determine the stock’s value. A stock’s value refers to the profit you could earn in relation to its current market price. To find out if a stock has a good price-to-earnings ratio, also known as a P/E ratio, you divide the current price for a company share by an individual share’s annual earnings.
  • Evaluate the company. Get a better idea of a company before you invest by taking some time to research its current management, industry, and balance sheet.

There are always risks involved with investing, so make sure you research your options and familiarize yourself with the processes before you get started.

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