Series - Getting Started Trading with Less Than $1k

Have you always wanted to invest in the stock market, but you felt that you never had the money to do so? This article will walk you through how to start investing in the stock market for under $1k.

Nick Ethan - 11.18.2020

Purpose: This article is for the person who is looking for a path to trade the stock market, but may not have that much capital to work with.

Maybe we want to title it something more along the lines of:

“Getting Started Trading with Less than $1k” You don’t have to be rich to trade the stock market.

We will walk people through the basics of:

  1. Introduction
    1. Sniper Mindset
      1. Biggest bang for your buck
      2. Blurb on Options Trading
  2. Setting Up an Account
    1. Selecting a Broker
    2. Account Type
    3. Funding the Account
  3. Your First Trade
    1. Preparation
      1. Tickers/Symbols
        1. Blue Chips
        2. FANNG
      2. Indicators/Charts
        1. MFI
      3. Market Basics
        1. Market Timing
        2. Market Cycles
        3. Market Energy

Introduction

The purpose of this article is to shed light on investing for people, more specifically people of the lower income classes.

Having grown up on welfare, I understand firsthand the extremely limited access to basic financial education and mentorship. Personally, I feel this has been implemented by design, but we will save that discussion for another time.

Mindset

First, I want to take a moment and speak to mindset. We must forgive our parents, they did they best they could with what they knew and what they had at their disposal.

Second, and more importantly, you are not your parents, you are not your circumstances and you have the power to change the trajectory of your life at any given moment.

Third, you must change the belief with yourself. You must understand that you are worthy of wealth and abundance, regardless of what your current environment tells you. When we shift our relationship with ourselves, we will start to shift our relationship with money.

The Sure Shot

Think of capital as bullets in a gun. Since we have a limited number of bullets and we must make sure we hit our targets.

Options

I am not going to do a deep dive on options, but in short let’s think of them as owning shares with a time limit. The longer the time limit, the more expensive the option.

YOU CAN LEARN MORE ABOUT OPTIONS HERE

We need to hit the target within the time limit or the position will become worthless.

Setting Up an Account

There are dozens of brokers to choose from, but I am more interested in getting you up and operational with as little distraction as possible.

Robinhood

For ease of use, we are going to use Robinhood in this example. Robinhood sucks for a lot of reasons, but it is a great place to get your feet wet. They also make it extremely easy for someone to get started trading with very little capital.

Account Type

We want to setup a margin account with the ability to trade options. Since we will only be doing basic option trades Level 2 is plenty.

Funding the Account

Deposit the funds…

Your First Trade

The first thing most people do is log into their trade account and purchase some random stock. DO NOT DO THIS. Remember, our ammunition is valuable and we want to find the “sure shot”.

Preparation

To prepare for our first set of trades we get to answer a few basic questions:

What Companies Do I Want to Trade? The first thing we need to figure out is what tickers/symbols do you want to trade? What companies do you follow and have faith in?

For me personally, I stick to trading the FANNG stocks. I do this for a few reasons, but the primary reasons are:

A.) I have extensive experience in tech and understand the products/services they offer. B.) They are massive companies that aren’t going to go bankrupt next week. C.) They will continue (hopefully) to see aggressive growth in the years to come.

Market Basics

Market Cycles

Think of market cycles like seasons. Some seasons are like Spring, full of expansion and growth. Some of the seasons are like Winter, stagnant and in hibernation. As with the seasons in life, Spring will always follow Winter.

Market Timing

When looking for a “sure shot” market timing is vital to help give us the necessary momentum to hit our targets. Since we are working with lower cost positions our targets may be a bit of a long shot. By taking the momentum of the market, it gives us the needed boost to cross the finish line before the time limit.

Market Energy

Generally after a very bad Winter in the markets, it is followed by an equally abundant Spring.

The reason for this has to do with the physics behind the energy of the markets. If the market moves in one direction, that energy is going to have to rebound in the opposite direction. It’s like pulling a rubber band back.

Indicators

How Do I Figure Out Where Companies Are at in their Cycle?

You can read about the core set of indicators that we recommend here.

Building the Sling Shot

Find the Target

Wait for the Signal

Execute the Trade

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