Online Stock Trading for Beginners
If you’re a newbie in the stock market, you’ve got to select a platform that provides tools that make online stock trading for beginners very accessible and easier than ever before.
Although there are many platforms offering such services, before choosing the best stock trading platform you need to learn some basics about the stock market.
Don’t get overwhelmed! Stock trading has become as simple as shopping online.
Day trading can be done anywhere, even when sitting in a coffee shop, and all you need is a good internet connection and to find the trading platform that offers easy to your tools for beginners.
If you’ve got $100 set aside or have the potential to save $10 a week then you’re set to enter the world of trading.
In this article, we’ll give you a starting point and walk you through the basics of online stock trading.
» Before you dive in, you might want to know more about:
- The difference between trading and investing
- How to start investing in stocks
- How to pick stocks and become a good investor
What is stock trading?
As a beginner you should know that stock trading is a form of investing that depends on short-term profits rather than long-term gains.
Stock trading involves buying and selling shares in companies with the intention to make money on daily changes in price.
If you trade stocks in the right way, you’ll be receiving rewarding profits. However, it can be risky to dive into the stock market without the proper knowledge.
Every trader has to keep this consideration in mind before placing any trade;
“Don’t take the risk and invest money if you need it.”
Although stocks can bring quick gains, they also carry the risk of substantial losses. That’s because the shares of a single company can easily rise and fall during the market hours.
» Need to back up a bit? Read when you should sell your stocks.
What is a stock market?
The stock market is the place where exchanges occur, such as the New York Stock Exchange and the Nasdaq.
It’s where buyers and sellers come together to exchange the shares of those stocks.
These exchanges track the supply and demand directly influencing the price of each stock.
The NYSE and the Nasdaq are open from 9:30 a.m. to 4 p.m. Eastern, with premarket and after-hours trading sessions also available, depending on your broker or online platform.
You’d probably heard people talking about whether the stock market is up or down, well in the trading world, they’re generally referring to one of the major market indexes!
A market index tracks the performance of a group of stocks, which either represents the market as a whole or a specific sector of the market, like technology or retail companies, such as the S&P 500, the Nasdaq composite and the Dow Jones Industrial Average, which are often used as proxies for the performance of the overall market.
Investors use indexes to benchmark the performance of their own portfolios and, in some cases, to inform their stock trading decisions.
» Must Read: ETFs vs. Index Funds
Bull markets vs. bear markets
We know what you’re thinking, and no this has nothing to do with animals! In fact, the bear in the market represents the true symbol of fear, referring to the falling stock prices. A bear market shows investors pulling back, indicating the economy may do so as well.
On the other hand, a bull market typically means investors are confident, indicating economic growth.
Bull markets are followed by bear markets, and vice versa, with both often signaling the start of larger economic patterns.
Don’t panic!
The average bull market far outlasts the average bear market, hence, over the long term you can grow your money by investing in stocks.
Let’s put it this way, if you invested $1,000 30 years ago in a stock, you could have about $7,600 today.
How to trade stocks as a beginner?
If you're trying your hand at stock trading for the first time, you’d better start with a little amount and invest in stocks through a diversified portfolio.
Here are the necessary steps for successful trading:
Open an account
If you’re trading, then you definitely need to set up your account. If you don't already have an account, you can open one with an online trading platform in a few minutes.
Set a stock trading budget
No matter how excited you are for trading stocks, allocating more than 10% of your cash to an individual stock can expose your portfolio to risk.
You can simply follow the 50/50 rule. Start by saving $100 a month. When you get to $1,000, you could invest $500 of that. In other words, invest only the amount of money you can afford to lose!
Learn to use market orders and limit orders
Once you set up your account and budget, choose the best online trading platform to place your stock trades. You'll be presented with the options for order types:
Market order: Buys or sells the stock ASAP at the best available price.
Limit order: Buys or sells the stock only at or better than a specific price you set. For a buy order, the limit price will be the most you're willing to pay and the order will go through only if the stock's price falls to or below that amount.
Get into more details about the order types.
Once you fund your account, login, select the stock you want to trade, pick an order type, and place the order.
4. Minimums to Open an Account
This might be holding you back from trading as you hear about financial institutions requesting minimum deposit requirements, by which they won’t accept your account application unless you deposit a certain amount of money.
Actually, some firms won’t even allow you to open an account with a sum as small as $1,000. However, other firms have made trading much easier where you can buy stocks starting with $1!
5- Commissions and Fees
In most cases, brokers will charge their clients commission for every trade. Trading fees range from the low end of $2 per trade but can be as high as $10 for some discount brokers.
Commissions generally cause investors to limit the total number of trades that they make to avoid spending extra money on fees.
But the good news is that you can find online trading platforms to buy and sell stocks with 0% commission!
6- Diversify and Reduce Risks
Diversification in trading is the other way to say “Don’t put all of your eggs in one basket.”
Indeed, by investing in a range of assets, you reduce the risk of one investment’s performance severely affecting the return of your overall investment.
Here’s where the major benefit of mutual funds or ETFs lies. Both types of securities
tend to have a large number of stocks and other investments within their funds, which makes them more diversified than a single stock.
What is the best trading platform for beginners?
Last but not least, you cannot be a smart trader without choosing the best trading platform.
Trading is no longer limited to hectic paperwork, but rather executed with a single click or touch on the mobile screen.
Now there are many free and paid mobile and web applications and portals for trading all over the internet.
Many companies now offer online platforms for stock trading.
Here’s one of them, Wealthface, a user-friendly platform that has some of the best tools for online trading.
So, if you do have the money and want to start trading, stock trading platforms have made it possible to trade stocks quickly from your computer or smartphone.
» Download the best stock apps on IOS
» Download the best stock apps on Android
The Bottom Line
You’ve got your hands on all that you want to know about stock trading platforms for beginners, and you’ve probably realized that you can start with a small amount through an effective online stock trading platform.
Be careful of the platform you choose, make comparisons to take advantage of the low competitive fees and commissions, and never forget, the key to successful trading is portfolio diversification!
