I've gotten lucky and got around $10k U.S. that I'm willing to experiment with in the stock markets.
I still work full-time and I'm financially stable. I think that stocks can be a "hobby-job" where I'd spend 2-4 hours a day trading. But I don't really know where to buy stocks? How to avoid shady stock-markets?

Let's say I want to try buying some penny stocks for $1K, where do I go? Is it a local or a global thing (do I have the same access to trading while I live in Japan)?

Just to be clear, I want to try doing two things: being a day trader and buy/sell stocks frequently. And I also want to invest in companies that I've researched and build up my finances through more long-term calculated means.

  • 2
    Let's say I want to try buying some penny stocks I'd avoid that or this will be a pretty short term "hobby-job" – quid Jul 18 '18 at 3:19
  • @quid thanks for the tip! I'll look into those in-depth before buying anything. I'd like to know more about how they work in the real market and what makes them what they are (and what are win-conditions with penny stocks). But still, thanks for the tip! – Creative Magic Jul 18 '18 at 3:28
  • Re being a day trader, I suggest you go to Las Vegas instead. They'll give you free drinks while you lose your money. – jamesqf Jul 18 '18 at 17:02
  • Bear in mind that if you're trading though a broker, you will be paying them for every trade. Unless you are a really good investor, those commissions will exceed any profits you make. So you will slowly and surely lose money. – Simon B Jul 18 '18 at 23:40

The stock markets are, mostly, in physical locations. The NASDAQ is an example of a market that is entirely virtual. Nonetheless, that has no relevance to your situation with only $10,000. If you wanted to trade on the NYSE you would have to buy a seat on the exchange. That would cost you several million dollars.

What you want to do is open a discount brokerage account. If you are in the US, then E*Trade, TD Ameritrade, or Charles Schwab will work well. Day trading is ill-advised even if you were experienced for several reasons.

First, the trades do not appear on the tape in the order in which they happen, always. In fact, the daily high and low are not the true high or low either. Large orders are taken "off the tape," and are reinserted in whole or in part during the day at such time as the broker-dealer handling the transaction at the weighted average price. People who think they are day trading and seeing this really big signal can be responding to transactions that happened much earlier in the day.

To give a personal example, I entered an order that cleared at a price above the market high. In theory, that should have meant that my order was the highest priced order for the day and the high should have matched my price. My order appeared on the tape at a lower price than I paid because it was averaged in with other orders as part of a block trade and didn't report til later. I only know this because when I realized the price that my order cleared at, I was going to take a screenshot and frame it. Unfortunately, the trade never made the tape and market high price was fifty cents lower per share than what I paid. I have never been the high or low before. I did once buy a major firm at 1/8th above the firm's all-time low price, but that isn't the same as paying the all-time low price. That was a long time ago because we stopped trading in 1/8ths in 2001.

The second reason is that you haven't yet learned the rules. If you had, you wouldn't be trying to day trade.

For you, the stock market happens wherever you have your computer. Open a discount brokerage account. Your better bet is to learn to buy securities under a rule that you cannot look at your computer more than once every second Wednesday. A lot can happen between two Wednesdays that will be out of your control. If your trades can survive your absence, you will do fine. If you have to look at it every second of the day, better make sure you never have a heart attack and that you never slip on ice or have a motor vehicle accident.

If you do decide to day trade, just know that I or someone like me is out there scooping up all the money you are dropping on the floor as you day trade. It would be quicker if you would just write me a check for the money. Hours per day losing little bits here and there will take you a lot of time. I could use a vacation and $10k would get me a cruise.

Please pick up a copy of The Intelligent Investor, by Benjamin Graham and an undergraduate accounting textbook. I won't get a vacation paid for by you, but you might get a vacation paid for by someone else. Cruises are nice.

  • I've just finished reading "The Intelligent Investor" and I've taken a Financial Accounting course in my undergrad. What other good books do you suggest getting? Thank you. – ToniAz Jul 18 '18 at 16:15
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    @toniaz There are two variants on Graham and Dodd's Security Analysis to consider. Cottle's 1987 version which helps a lot if you are new or the current reprint of the 1943 edition filled with commentary to update it ro modern accounting rules. Beyond that, you should pick up a book on securities law, regulation and customs. They really do matter. Finally, you should get a book on liquidity management. Read Ashok Abbott's chapter in the Valuation Handbook. It's brilliant. – Dave Harris Jul 18 '18 at 16:52
  • I will look into those. Much appreciated. – ToniAz Jul 18 '18 at 17:21

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