How To Trade Stocks For Beginners – Step – by Step Guide
Learn how to trade stocks in just few steps, as well as our guide on how to choose the right kind of stocks to help make you money
Are you interested in trading stocks but not sure where to start?
Or maybe you already trade stocks, but you lack confidence in your process and need guidance to improve.
One should try to buy and sell hot stocks in the anticipation of striking it rich, I suggest you reframe: Investing is a long-term strategy to help ensure your financial future.
No matter your level of trading, this post can give you an effective framework for approaching the markets, starting from starting from scratch. Let’s dive in!
How to Trade Stocks
Trading stocks can seem pretty simple.
Step -1 Open an online brokerage trading account
First, you need a brokerage account, which is basically an agent who will buy or sell a stock for you. Then, you need capital to purchase the stocks.
- Step A: Go to the online stock broker website for the brokerage of your choice.
- Step B: Click on the “Open an account” button.
- Step C: Start an sign-up application for an “Individual brokerage account.”
- Step D: Enter information about yourself — name, address, birth date, employer info or aany other info required
- Step E: Set up an initial deposit by entering your bank information. Some brokers require you to make a minimum deposit so use a separate bank account in order to deposit money into the brokerage account.
- Step F: Wait. The initial transfer will take anywhere from 3 to 7 days to complete. After that, you’ll get a notification via email or phone call telling you you’re ready to invest.
- Step G: Log into your brokerage account and start investing
Some other things to consider when opening an account to buy stocks:
- Decide the investment amoumnt. Quite a lot of online stock brokers have a $0 minimum requirement to set up a traditional individual trading account. For a regular brokerage account, the minimum investment can range from $0 to $2,000 or more.
- How frequently you trade. At most brokers suitable for new investors, online stock trading commissions run between $5 and $10. Low commission costs will be more important to active traders, those who place 10 or more trades per month. Infrequent traders should steer clear of brokers that charge inactivity fees.
- How much trading support you want. If you think you need more help regading opeing the account it’s a good time to test the broker also ask if the broker’s offerings of tradimg learing tools, investment guidance, stock-trading news and live person via phone, email, online chat .
Step 2: Select the stocks you want to buy
Once you’ve set up and funded your brokerage account, after that, you’re ready to trade. Now it’s the right time to select the shares or stocks so choose which stock you want to buy and at which price.
Next step is to reserch into the business of picking stocks. A good place to start is by researching companies you already know from your experiences as a product user.
Take some time right now to write down 15 companies you use and return to time after time.
Think of everything. For example:
- Food: McDonald’s Corp, Starbucks Corp, Shake Shack
- Clothing: Under Armour, Limited Brands, Etsy
- Services: IBM, UPS
- Technology: Apple, Microsoft, Snap
- Entertainment: Disney, Live Nation, Netflix
- Transportation: Tesla, Ford, CSX Corporation
Don’t let the deluge of data and real-time market gyrations overwhelm you as you conduct your research. Keep the objective simple: You’re looking for companies of which you want to become a part owner.
you’re all set. You’re trading your first stock!
Yep, it seems simple. But there’s so much more to trading.
You can’t just pick stocks at random. (Well, you can, but then why not just throw your money away?) You need a trading strategy, a trading platform, and a few other things. That’s what this post is all about, so read on to learn more about trading stocks.
What Are Stocks?
Before we get into the nitty-gritty, let’s make sure you know exactly what stocks are first.
A stock is a fractional piece of ownership in a company that’s traded on a stock exchange.
For example, let’s say you buy a share of Amazon. That means you own a tiny fraction of the company. And when the company pays out profits to owners in the form of dividends, you’ll get a cut based on how many shares you own.
The price of stocks can fluctuate, depending on supply and demand — how much other traders in the market want to buy or sell the stock.
Benefits of Trading Stocks Online
With modern stockbrokers, there are two main ways to make stock trades.
You can do it the old fashioned way: Phone your broker to place a trade. That can often entail getting routed to a call center, disclosing your account details, and answering security questions. Then you carefully detail the exact trade you’d like to make.
Thankfully, there’s a much easier way to trade where you maintain more control. Use an online system that most brokerages provide.
You log in to your account, click a few buttons to select the stock and the price, then confirm the trade details. You’re in control the entire time.
You might also be able to lower your fees. Many brokers charge lower commission rates for online trades than for phone orders. Commissions can add up fast and eat into your accounts. Trading online can help you minimize those costs.
How To Trade Stocks in 6 Steps – Smart Trader’s Process
This is where things get fun and exciting: trading stocks! We’ll go through the process of trading in detail.
This list of six easy-to-follow steps can help teach you a smart trader’s process of approaching the market. Get ready to follow along …
#1 Follow Key Chart Patterns
Stock prices tend to move in patterns that repeat time and time again. That’s why many savvy traders devote a large amount of their analysis to watching patterns in the price chart.
Traders in the market will at times be fearful, greedy, cautious, or wild, and these emotions will present themselves over and over again in similar price patterns.
By being able to read a chart, you can learn to anticipate the likely next move of the stock, determine intelligent levels to place your stop-loss and know when it’s time to close out your winning trade.
#2 Set Stock Trading Goals
Before you start throwing money at trading, you need to set some goals. Randomly buying stocks and hoping for the best is not a trading goal. At least, not a serious one.
If you wanna gamble your money away, go ahead. Hit the slots. Buy lottery tickets like it’s your last day on Earth. But you’re likely here because you want to know how to act like a savvy, intelligent trader.
So, here’s what you do instead: Set goals for what you want to achieve from your trading, then build a trading plan to realize those goals.
And your goals don’t have to be strictly about the money, such as “make $50,000 next month.” In fact, monetary goals aren’t often ideal. Good trading is about taking whatever opportunity the market allows — sometimes it can be a lot, sometimes a little.
The quality of your trading should be one of your main goals. This can mean you would only trade your absolute A+ favorite setups or maybe you aim to hold on to winners as long as possible.
You can also have goals related to risk or turnover. For example, never lose more than 10% of your capital or never take on more than two trades in any week.
Whichever goals you set, make sure they help you build smart, solid trading habits.
Establish a Stock Portfolio Goal
If you’re not just trading stocks, but instead holding a portfolio of stocks for the medium to longer term, you need to create a portfolio goal.
A portfolio goal can be similar to your trading goals and can also include things like being evenly diversified between four or five different sectors.
Diversification can allow you to spread your risk across sectors, so if one sector declines, you can still hang on in the others.
#3 Read and Follow the Market
If you want a good grasp of the markets, you’ve gotta know ‘em. That includes the news around the overall markets, as well as sectors and stocks you follow.
The first step to staying up to date is to watch the price movement in a diverse collection of stocks, sector indices, and markets, such as the S&P futures. This will give you a 360-degree view on where the action is in the markets. It can help you spot opportunities early on in up-and-coming sectors.
Next, read the news stories related to all the stocks and sectors on your watchlist.
You can read the mainstream financial news sources such as The Wall Street Journal or Financial Times. It’s also smart to read SEC filings, follow respected traders on Twitter, and scan online discussion boards. This is all part of your trading research, and how you can separate serious opportunities from the fray.
Staying on top of the market new isn’t just to be aware of what’s happening in the markets, it’s also a means to spot potential trades with news catalysts.
A news catalyst can be any recent development that might move a stock price.
This is something to watch for every day. Maybe a company announces a new product, files an SEC report, or is at the center of a rampant rumor. If the information is juicy enough, the market just might bite. And all those nibbles can push the stock price up or down, sometimes wildly.
And rapid movements can make for great trades — if you know what you’re doing. If you want to find stocks to trade, add news catalysts to your daily analysis.
#4 Find a Stock Trading Mentor
Before the days of the internet, most people learned how to trade stocks on their own.
Going it alone meant constantly reading, studying, and trying to wade through conflicting advice in an attempt to merge it all together into a winning strategy. That monumental task was likely full of stress, dead ends, and sleepless nights … and losses.
Thankfully, things are different today. Many successful traders mentor other traders to help them find their best path and shorten their learning curve.
Take, for instance, penny stock trader Tim Sykes, who took his bar mitzvah money as a teenager and started trading penny stocks. So far, he’s reportedly turned around $12,000 into a little over $4.8 million.*
Tim doesn’t just trade, he also teaches his skills to other traders, travels the world, and does great work through his charities.
Working with a mentor can give you insight into how a successful trader interacts with the market and how to create your own well-informed trading habits and strategies. Etoro social trading platform can be plenty helpful.
It’s a big step toward trading know-how, so make sure to find yourself a good mentor!
#5 Keep a Trading Journal
Becoming a trader is a journey. You need to be prepared for the many ups and downs and learn from your mistakes.
A trading journal is everything when it comes to tracking your journey. And it’s not just for newbies — many of the world’s best traders keep journals even after they’ve found massive success. A journal can be that powerful.
So how to use a trading journal? This is where you record everything related to your trading. Include your entry point, exit point, stop-lossprice, market observations. Keep notes about your mindset … when you were clear-headed or when you lost out to emotions.
As you record and gather data, you can then go back and review. It’s part of the process of finding areas for improvement as well as what’s working for you. Smart trading is about doing more of what works and less of what doesn’t.
Keep a journal! Use it to analyze and grow your strategies and skills throughout your trading career.
#6 Build a Watchlist
Tens of thousands of stocks are traded in the U.S. every day. There’s just no way for any single trader to track them all. That’s why you keep a watchlist, a focused group of promising stocks.
What do you include in your watchlist? Stocks that you find exciting for any number of reasons. The company may be a leader in a booming sector, gaining a lot of hype in the press, or simply has an exciting chart pattern.
You don’t have to use just one watchlist, you can keep several. Maybe one for pot stocks, one for biotech, and another for large-caps — it’s whatever works for you.
After you funnel stocks into your watchlist, you can focus your analysis on the best opportunities and be more prepared to act when the market opens.
3 Key Tips on How to Trade Stocks Online
The six steps above will help you get on track and build confidence as you face the market. Now let’s dig into some steps that can help every trader, no matter their skill level.
#1. Establish Your Risk Tolerance
Heed this warning: In the stock market, there’s no such thing as a risk-free trade.
You’re always playing probabilities, and any trade can turn into a loss. So, to stay in the game you need to know how to manage risk intelligently.
We can’t stress this enough — before every trade, know how much capital you can risk.
Always stick to your trading plan. You don’t want to lose more than you expected and have to reconsider your strategy in the middle of a trade. You’ll go insane — and likely incur losses — if you trade that way.
As a rule of thumb, most savvy traders risk no more than 1% or 2% of their capital on each trade. This means that a run of bad trades won’t knock them out of the game.
Make sure you determine your risk tolerance and build it into your trading plan before you trade.
#2. Know Where to Buy Stocks (and Where to Sell Them) Before They Get There
When you’re buying or selling stocks, it’s key to have a solid plan for your ideal price levels … before the price hits those levels.
Why? Stock prices can move super fast, and if you don’t know your transaction levels, it’s too easy to make mistakes.
This is all part of your research, like your pre-market analysis and chart patterns. Mark the exact price points that might prompt you to act on a trade. Write it down. Set an alert on your trading platform.
The more detail you know about a trade beforehand can help you act quickly when the price hits your key levels. Always be prepared.
#3. Take Advantage of Social Trading Features
It’s said that showing up to a gunfight with a knife is a bad idea, right? Well, trading without a powerful trading platform is basically the same thing.
The markets are competitive, and that means you need to use every advantage at your disposal. That’s why etoro is a powerful place to trade together and copy professional traders.