Many friends on mine want to know how to make money in the stock market with little money. The answer of course is that it is pretty hard to land much in the way of profits if you don’t have any capital to start. That usually stops most from trying, however some intrepid traders have found success. The secret to these traders ability to profit with capital levels smaller than most car payments today is becoming more widely known.
The Simple Mathematical Infeasibility of Low Capital Trading Stocks
I could answer this header with two simple words: transaction costs, but I won’t leave you with so incomplete and answer. What I mean by transaction costs making trading stocks unprofitable at low capital levels is simple math. On a good day, a stock might move 1 percent in your favor. If you had $100,000 invested and gained 1% on a particular day, you would have a gain of $1000. Sounds reasonable, no?
But what if you were trying to trade with only $500? A 1% gain on a trade would net you only $5. Even so, five bucks is still five bucks, right? Wrong! Your broker (if you’re lucky and have a deep discount broker) charges you a commission of at least $4.00 per trade – and given you had 2 trades (a buy and a sell), your commissions cost you $8. Given your profit was only $5, your transaction costs ate up your entire profit and cost you $3 to boot. Still, you could instead hold on to your stock in the hopes that it would double in what, 5 years? Honestly – if you know how to make money in the stock market with little money like $500 as in our example here, more power to you. On the other hand what if your knowledge of the stock market could land you something like a profit of say, $375 on a one day trade of $500. Would learning this way how to make money in the stock market with little money be worth an investment of your time?
How to Make Money in the Stock Market with Little Money Using Commission Free Brokers
One blessing of the financial revolution the world has experienced is the opening of new markets and new ways of investing in them. A smart group of brokers discovered there was a huge underserved market of very smart, market savvy traders who simply didn’t have the capital needed to trade the market with the economy of scale necessary to make a living full time. The solution was a simple to understand no commission form of securities called binary options, which are now traded in over 140 countries around the world.