How To Get Started With Stock Trading?

How To Get Started With Stock Trading?


When you’re just starting with trading, it can be difficult to decide which instrument you’re going to trade with. Should you go for gold or maybe oil? Currency pairs maybe?

While those are all great instruments to trade with, they often require lots of knowledge about the markets and the ins and outs of the industry in question. They also depend on political events which can be difficult to predict.

Stocks, on the other hand, allow you to potentially make a profit by predicting whether a company (Apple for example) will have good business results or not. This makes stocks an ideal instrument for beginners because they can learn how trading works and at the same time trade on an instrument that is easy to understand and easier to predict.

Just like many other skills, stocks trading can be easy to start with but takes a while to master. But let’s start at the beginning.

What is stock trading?

Stock trading is buying and selling shares of publicly traded companies. Some of the popular stocks you might’ve heard of are Tesla (TSLA), Apple (AAPL), Alibaba (BABA), Amazon (AMZN), Microsoft (MSFT), etc. Those are just some of the most popular companies that are publicly traded, but you can find many more that you could trade with and potentially profit from the price movements of their stocks.

Whenever you buy a stock, someone is selling that stock to you. Likewise, when you’re looking to sell your stock, someone else will be buying it from you. The market is huge and many people are interested in buying or selling any given stock at any time. 

Price of the stock depends on many factors and one of the most important ones is the number of buyers and sellers in the market. If more people are interested in buying the stock compared to the number of people wanting to sell it, the stock price will go up as the demand is higher. If people are more interested in selling the stock that will push the price downwards.


How can you get started with stock trading in 3 simple steps?

Get Started with Stock Trading

1. Learn more about the stock market

There is no shortage of trading materials out there and many of them discuss the stock market in depth. Many of those materials are free so there’s no need to pay a lot of money in order to get started. 

It’s important not to focus too much on one aspect of trading. No matter which financial instrument you’re trading with, you need to know about the market in general since many factors always come into play. Even if something doesn’t feel relevant for your particular situation, it can turn out to be very useful in the future.

Your broad market education will serve you during your whole trading career, even if you’re unsure what your next step will be. It’s great to learn from various sources and trading materials, but you also need some hands-on experience. Follow the market newsand charts and trade daily and you’ll become a stocks trading pro.
 

2. Open a trading account

When you open a trading account, it’s necessary to do it with a regulated and trusted online broker which offers you a variety of stocks to invest in. If you’re just starting out with trading stocks, you should first open a demo account and trade for a while there until you’re comfortable to switch to a real trading account.

3. Manage your risk

Once you start trading with real money, you have to develop a risk management strategy. Every position you open can and should be secured with market orders such as limit and stop loss orders, in order to maximise your profits and reduce potential losses. Also, don’t forget to check your position often and keep track of your trading results. 
One way to do this is with a trading journal that would document all your trades and their results. That way you’re building your own trading guide which can give you some important long term insights and set the foundation of your path to expert trader status.
 

Conclusion

If you’ve been following a company (or a couple of them) and you’re familiar with their products and services, you can often deduce whether the value of their stock will go up or down. Stocks trading allows you to profit from those insights and that’s why stocks are among the most popular trading instruments.

Pick a good online broker which has the stocks that you want to trade with and open an account with them. 

Don’t forget to manage your risk. Regardless of the stock you’re trading with, the price can always go in an unpredictable direction and you need to ensure that any potential losses are minimal.
 

Sources Consulted:

1. Kennon, J. Learn how to trade stocks online with this simple guide. https://www.thebalance.com/stock-trading-101-358115
2. Farley, A. Learn how to trade the market in 5 steps. https://www.investopedia.com/learn-how-to-trade-the-market-in-5-steps-4692230 (2021)
3. Reinkensmeyer, B. 10 great ways to learn stock trading in 2021. https://www.stocktrader.com/learn-stock-trading/ (2017)
 

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