Starting Small to Make it Big in Share Trading

As beginner, you may not have enough capital to start trading. More importantly, you want to make money from the market - hoping to turn a couple of hundred bucks to a thousand – so why risk a huge amount of money in the first place? So with the little money you have in your account, is it wise to trade even though you don't have enough capital?

Things to Ponder if Undercapitalised

Always remember that to make money from the stock market, you need money. To be able to bank large profits you need to wager a big capital. But this does not mean you should use you entire savings. Making consistent profit needs discipline. Your emotions can easily influence your decisions especially when you're desperate to earn money.

You need to decide whether you want to be an investor or trader. This in turn will decide what trading plan you should use. A trading plan is essential in making informed decisions and cutting losses. This also has implications on your taxes.

What are your objectives? Do you need to earn money for a living or to increase your capital? Did you find a good valued stock that you to want to invest in at the moment? If you need to earn money for a living, then its not wise to quit your day job, especially for the fact that you have a small capital to begin with. Juggling expenses with an inconsistent source of income is very difficult and not advisable. If you need to increase your capital, you need to find a strategy that will enable you to grow your funds. If you found a good stock see if its profitable, but risk trading is not advisable.

Understand risk and find other alternative sources of capital. However, be careful before going for a margin loan or borrowing money from other means unless you have a plan to be able to settle it and profit at the same time.

Options

You can trade one or two stocks, this will make your portfolio manageable, and affordable.

Generate income through dividends, possibly through undervalued stocks. You can buy and sell in the next 12 to 18 months when the price has increased. This will allow you to grow your capital and reinvest it in some other profitable opportunity.

Paper trade first. Practice making a consistent rate of return at 20 percent or more.

Seek your own mentor, but make sure that this person has successfully traded long term. It certainly helps when you have someone to offer advice.

Trading is a big risk at any amount. If you have a profitable proven trading plan with money that you can lose, then you can go ahead and give it a go. But if your whole life is on the line, and you may end up homeless if you lose what capital you have, then its best to sit back and practice.