SPY Trading As A Beginner
By April September 17th, 2022
If you are like me, brand new to even thinking about trading, then we can benefit from learning more about trading SPY as a beginner, why, and how much to start with. Let’s start by looking at some important qualifiers, such as a beginning trader’s budget.
As a beginner, you may not have much money to start trading with; you may only have a few hundred dollars or less. Being recently divorced with two teenage sons, my budget is very tight, but I want to start now before retirement age.
It has been suggested that a lower budget is acceptable, as long as you understand that you will not be able to make significant investments and your profits will be limited. Trading SPY can still be profitable with a small budget, but it will require patience and discipline. Luckily, since my kids are teenagers, I have a lot of free time to devote to this.
When starting out, we must be aware of the risks involved in trading. SPY, although linked to the S&P 500, it can be volatile, especially options. There is always the potential for loss. Be sure to only trade with money that you can afford to lose.
There are also many strategies to implement from following certain pros on YouTube or blogs. As a beginner, it is essential to find a strategy that you are comfortable with and that fits your risk tolerance.
Once you have chosen a strategy, the next step is to learn as much as possible about it. You can read books, take courses, and watch videos on the subject. Knowledge is power in the world of trading. The more you know, the better equipped you are to make money.
However, you will learn the most from your mistakes by actually trading in the real world, with real money on the line. So, be sure to start small. Make small trades and gradually increase your position as you become more comfortable with your process and strategy.
Now that we have covered some of the basics let’s look at how we can learn to trade SPY effectively.
SPY is traded on the stock market, meaning you will need to open an account with a broker to trade. There are many brokers to choose from, so be sure to shop around and find one that suits your needs. In addition, there are other alternatives to brokers with technology today, with sites like Etrade, TD Ameritrade, and Robinhood to help.
Which trading is best for beginners?
Here are a few of the Best Trading Platforms for Beginners 2022
- Fidelity – Best overall for beginners
- TD Ameritrade – Excellent Education
- E*TRADE – Best for ease of use
- Merrill Edge – Best client experience
- Webull – Best investor community
When choosing a broker, you will need to deposit money into your account to start trading. How much money you deposit will depend on your budget and how much you are comfortable with risk. Remember, starting small and gradually increasing your investment is always better as you become more comfortable with the process.
Now that you have money in your account, you are ready to start trading. When you place a trade, you will need to choose whether to buy or sell (short). Generally speaking, if you think the price of SPY will go up, you will buy. If you think the price of SPY will go down, you will sell. Or purchase call or puts in the options market.
Websites like spytommorow.com will post their “predictions” in the afternoon to provide an educated guess based on their developed algorithms for where SPY might be trading the next day.
Always do your individual research before making a trade! The decision is always crucial, including looking at the financial news, technical analysis, and anything else that might impact the price of SPY.
When you’re ready to place that trade, you will need to enter the ticker symbol for SPY, which is “SPY.” The amount of shares that you want to buy or sell will also need to be entered. Lastly, you will need to choose whether you wish to place a market order or a limit order. What does that mean?
An order to buy or sell shares at the current market price is called a market order. An order to buy or sell shares at a specific price is called a limit order. For example, if you place a limit order to buy SPY at $375 per share, it means that your order will only be executed if the price of SPY reaches $375 per share.
Once you have placed your order, all you need to do is wait for it to be executed. If you place a market order, your order will be executed immediately. If you place a limit order, your order will only be executed if the price of SPY reaches your specified price. SPY is very liquid, so it shouldn’t take long for your order to get filled.
Once your order has been executed, you will see the shares in your account. You can then hold onto the shares for as long as you want or sell them at any time. However, if you purchase options, time is not on your side and you should have an exit plan.