Choosing the best trading tools can make the difference between huge profits and damaging losses. Investors should be prepared to do diligent research on any of the trading aids that they decide to use, whether they include computer software programs or investment firms. One of the best trading tools for novice investors is paper trading, which allows them to simulate actual stock trades and see how well they would do with a real account. The types of tools used by investors are dependent on whether they're looking for long-term capital growth or short-term profits.
For those deciding to invest for the first time, there is a vast amount of information and advice available to help them. The problem is that there is so much available that it can be impossible to choose the right kind of help. If investors are going to pay for some help from a website, a portfolio manager, an investment firm, or any other type of financial service, they should make sure that whatever trading tools they choose can vouch for their reliability and track record.
If investors choose to go it alone and invest without professional help, it can be a good idea for them to get some practice trading first. Paper trading is one of the most useful trading tools because it affords investors this valuable practice time. Investors can make trades that are affected by real-time, actual stock prices, only there is no actual money changing hands. Their simulated accounts will reflect the success, or lack thereof, of their paper trades, which can give an idea of how well they'll do with the real thing.
Investors should choose their trading tools based on the goals they have for their trading. If they're planning to be short-term traders looking to make quick profits, the tools they use should help them distinguish price trends. Day traders and swing traders often get in and out of positions in short spans of time, so knowing how a stock price will move in the short term is paramount in these cases.
By contrast, those traders who are in the market for the long-term should be looking at the companies behind the stock as opposed to any short-term price trends. The trading tools used by these investors should focus on determining intrinsic value, which is the true worth of a company regardless of its market price. Those companies with intrinsic values significantly higher than their market prices are likely underrated and are the ones most likely to rise in the future