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1. Set up a trading office in your home. You will need a room or area with cable TV, a high-speed Internet connection and at least one computer that is capable of quickly processing data and executing trades. Immediate access to stock price data is critical, so the faster your machine is, the better off you'll be. Cable TV is also important, because CNBC TV and Bloomberg TV broadcast news and interviews that influence stock markets and share prices.
2. Sign up and create a trading account with an online brokerage house. There are several online brokers from which to choose, but the key factors that should influence your decision are the price per executed trade, access to real-time stock data and the universe of stocks you are permitted to sell short. The price per executed trade is important, because it is an expense item that cuts into your profits, especially if you execute a high volume of trades. Access to real-time stock data is important for receiving and processing information, and the volume of stocks you are allowed to sell can limit your opportunities for profitable trades.
3. Develop a trading system and stick to it. Your trading system should reveal your goals, techniques, rules of analysis for each share investment, and your strategy for deciding whether to buy, sell or hold a stock. Develop your abilities to perform technical stock analysis and fundamental analysis. There are many technical analysis tools, including candlestick charts and moving averages. Most established online brokerage houses make technical analysis screening tools available to their customers. Fundamental analysis involves research relating to company performance in the competitive marketplace. It involves analysis of annual reports, revenues and profits. Information relating to market share, market penetration, revenue and profit growth and product pipelines also factor into fundamental analysis. Ultimately, your trading system should involve a combination of fundamental and technical analysis.
4. Conduct stock research and select stocks to trade. This involves daily stock analysis and monitoring market developments. You should monitor available media outlets, such as stock market reports, CNBC, Bloomberg, financial newspapers and investment magazines, all with the purpose and objective of identifying stocks that will increase in value and enable you to sell at a profit after holding them for a period of time.
5. Trade the selected stocks and monitor their performance on a daily basis. Keep detailed records of each trade you make, not just to determine your profits and losses, but also for tax preparation purposes. Profits from trades completed in less than one year are subject to regular taxation, while trades completed over a period of more than one year are subject to long-term capital gains taxation. You should also use your profit and loss information to make any necessary adjustments to your trading system.