Trading Stocks From Home: An Income Source in 2021?

With only a few weeks left of the dumpster fire that has been 2020, many of us are scanning the horizons for a glimmer of hope.

2021 seems like a bit of a promised land. Somewhere we can recoup and recover from the mental, social, and financial trauma of this year.

With so many losing wages this year, it’s no wonder that a lot of people are looking for additional sources of income. Trading from home is on a lot of people’s radar thanks to advances in technology and more online markets.

But can you make a decent income from trading at home? Is it the right choice for 2021?

Let’s take a look.

How does Trading Stocks From Home work

Traditionally traders work on the trading floor of the stock exchange. They buy and sell stocks through dealers on the floor. It’s the dealer’s job to match buyers to sellers and take a cut of the deal.

When you’re trading from home, the premise is similar but the people are virtual.

To be able to trade, you’ll need to choose an online broker. This is because individuals are not allowed to trade. Brokers are authorized to trade on behalf of individuals.

Once you have an online broker account, you will need to deposit funds before you can start trading. There are two kinds of accounts you can set up, a cash account and a margin account.

Cash accounts are fairly straightforward, you can only spend what you have in your account.

Margin accounts allow you to borrow from the broker based on the stocks you hold. These are held as collateral. For a more detailed understanding of the difference between the two accounts,

With your funds now in your account, you can begin trading.

Trading online isn’t an instantaneous transaction. The broker still needs to match you with a buyer or seller and will need to process the transaction. Patience, calmness, and a clear head are key to getting ahead in trading.

You will only be able to trade while the market is open. The New York Stock Exchange, for example, is open between 9.30 am and 4 pm EST.

One of the mistakes people make is assuming that they can just trade around their schedule. This is possible as the time difference between international markets and online markets tends to mean that there is always a market open.

However, you need to think carefully about what markets you trade-in. They will all have different levels of volatility and value.

What you need to have for trading stocks from home

To trade from home you need the following:

• A secure understanding of trading
• A mid-range computer or laptop that can cope with trading platforms
• A Stable and speedy internet connection
• An online broker
• A trading plan
• Some capital

Education is one of the most important commodities when it comes to trading. You need to know what you are doing and how to trade safely.

Brokers often have educational resources that you can access once you open an account. There are also lots of websites and books available to help you understand the process and trade. Check out sites like https://www.thestockdork.com/ for free, detailed educational resources.

A trading plan is essentially your business plan. It should detail what strategies you are going to use and also set your limits.

Capital is what most people are concerned about. How much do they need to invest?

Well, it depends on what market your trading in, what broker you use, and how often you’re going to be trading.

Brokers tend to have a minimum cash deposit. This will vary depending on which broker you use. In some cases, you can invest as little as a few dollars. This is going to take a long time to grow as you don’t have a lot to play with.

The general rule is the more you invest the more you can see in returns.

Some brokers also have a minimum account balance which means that you need to keep a certain amount in your account at all times.

If you’re going to be making four or more day trades a day over a 5 day period from a margin account you will be classed as a pattern day trader.

If you are identified as a PDT you will need to have a minimum of $25, 000 in your account at all times. If you dip below this, you will not be allowed to trade.

Obviously, for a lot of people $25, 000 is simply too much upfront capital.

Risk of trading stocks from home

As with any trading, the main risk of trading online is losing a lot of money. Arguably, the risk is much higher with online trading as it is often marketed in a way that makes it seem deceptively easy. This can lure new traders into taking bigger risks and making big losses.

If you do want to start trading at home, you really need to do your research. Don’t be taken in by low online broker fees and automated stock-picking software. You need to understand the choices you make.

Trading has always been a high-stress career. Whether you’re doing it on the trading floor or in the comfort of your own home, you need to be ready to cope with the stress. You will lose at some point and you need to be able to manage that.

There is an increased risk of mental health problems when trading from home. This is mostly because you are isolated. To mitigate this risk, try to connect with other traders online. Your broker may have some sort of community where you can share ideas and concerns.

Is it viable to do stock trading

If you’re looking at home trading as a get rich quick scheme, then no, it’s not viable. Just because you’re doing it from home, doesn’t mean that it requires no effort. If a broker or website tells you they can make you millions of dollars through trading at the click of a button, stay away. They are selling something and it’s not wealth.

With trading, you reap what you sow. If you’re prepared to put the time and effort into educating yourself, creating a trading plan, and making sensible decisions you can see a good return on your investment.

The trouble with trading is that it is not a consistent income. You might make 3k one day but then lose 4k the next. If you have bills and a mortgage to pay, you may struggle.

Final Thoughts

We can’t predict with certainty what the markets are going to do tomorrow, let alone the next year.

Trading, when done sensibly by a well-informed person, can be a great way to supplement your income but as a primary source of income, it’s a lot more volatile. This is especially true right now when a lot of the markets are seeing big dips and dives thanks to the pandemic.

Our advice is to play cautiously if you are going to start trading. Don’t give up the day job just yet.