If you have been itching to start investing and trading stocks, you have come to the right place. Trading stocks on a stock exchange like the New York Stock Exchange (NYSE) or Nasdaq can be an exciting way to grow your money, but it requires some basic knowledge before jumping in. In this beginner’s guide to trading stocks, we’ll cover:
– What stock trading is
– How the stock market works
– An introduction to basic stock market terminology
– Key things to know before starting to trade stocks
– Step-by-step instructions on how to start trading stocks
Read on to learn everything you need to get started with trading stocks.
What Is Trading Stocks?
Trading stocks means buying and selling shares of a company on a stock exchange with the goal of making a profit. Some traders try to make small gains per trade, while others look for the large “home run” trades. Traders try to buy stock at a lower price and then sell it later for more. These trades happen through a brokerage platform, which facilitates the transactions between traders and the stock exchange markets.
In addition to trading shares of a company’s stock, traders can also buy and sell options contracts and exchange traded funds (ETFs). Most beginners start off by trading stocks since that is the simplest asset to trade. We’ll focus on stocks in this guide for new traders. Read more about trading on the website https://kirill-yurovskiy-trade.co.uk/
How The Stock Market Works
Before you start trading, it helps to understand a bit about how stock markets operate. The largest stock exchanges are the NYSE and the Nasdaq. Here are a few key points to know about them:
– Publicly traded companies list their shares on an exchange. The exchange facilitates buying and selling of the company’s stock.
– The price of a stock fluctuates according to supply and demand. If more people want to buy a stock (demand) than sell it (supply), the price moves higher.
– Stock markets use automated electronic trading systems. Computers route orders and execute trades in fractions of a second.
– Anyone can buy and sell stocks as long as they have an account with a brokerage that’s licensed to trade on the exchanges.
With that overview of the stock exchanges, let’s move on to some key terms for trading stocks.
Stock Market Terminology For Beginners
As a beginner, you’ll need to know some basic stock market lingo. Some of the key stock trading terms include:
Stock share – A stock share represents partial ownership in a company. Corporations issue shares when they first sell stock.
Share price – The current value at which each share of a stock trades. The price is set by buyers and sellers trading stock on exchanges.
Stock ticker – An alphabetic code used to uniquely identify public companies. For example, AAPL for Apple or FB for Facebook.
Bullish or Bull Market – When stock prices are rising in a sustained uptrend. Traders want to buy in a bull market.
Bearish or Bear Market – When stock prices are falling in a downtrend. Traders usually sell out of positions in bear markets.
Dividend – A cash payment a company makes to shareholders as a distribution of profits. Dividend stocks can produce steady income.
Earnings – The profit a company makes. Earnings reports from companies drive significant stock price volatility.
Volume – The number of shares traded during a given time period. High volume usually signals lots of interest in a stock.
Bid vs Ask – The bid is the highest price a buyer will pay. The ask is the lowest price a seller will accept.
Spread – The difference between the bid and ask prices. A smaller spread usually signals greater liquidity.
By familiarizing yourself with these common terms, you’ll have an easier time understanding the stock market news and analysis. Now let’s move on to what you need to start trading stocks.
How To Get Started With Stock Trading
Many eager new investors want to know the basics of how to begin trading. Here is a step-by-step process for stock trading beginners:
Find an Online Brokerage
The first thing you’ll need to trade stocks is opening an account with an online brokerage firm. There are many reputable brokers to choose from, including household names like Charles Schwab, Fidelity, E*TRADE, and TD Ameritrade.
Some key things to evaluate with an online broker include their trading commissions on stock trades, investment options beyond just stocks, the trading platform and tools, customer service, banking capabilities, fees for services, and educational resources for beginners. You’ll want a well-rounded broker that meets your needs as a new trader while keeping costs low.
Open a Brokerage Account
Opening a new brokerage account is straightforward. You can visit the broker’s website and complete an online application in about 15 minutes.
You’ll be asked to provide basic personal information and verify your identity. The broker will also have you sign agreements acknowledging you understand the risks involved in trading stocks. Fund your new account via electronic bank transfer and you’ll then be ready to start trading stocks online.
Develop a Trading Plan
Once your brokerage account is open, take some time to educate yourself and develop a stock trading plan before placing your first trade. This trading plan will be unique to your goals and risk tolerance.
It should cover key details like what stocks or funds you will trade, how much you will risk per trade, how frequently you will trade, the amount of capital you’ll commit, what your profit target is, and how you’ll manage losses. Having a plan is essential for responsible and successful stock trading.
Place Your First Trade
Now the fun can being…placing your first stock trade. Search for the stock ticker symbol of the company you want to trade and input how many shares you wish to buy or sell. For a long-term investor, choosing established companies in industries you understand is wise. More aggressive traders may opt for faster-moving stocks with shorter holding periods per trade.
Confirm the details like order type (market order, limit order, etc), number of shares, price, commission costs, and total transaction value. Then submit your order during market hours (9:30am to 4pm eastern) and congratulations, you just made your first stock trade!
Review and Refine Your Approach
As you gain some experience with executing stock trades, you’ll want to review your brokerage account frequently and analyze your trades to improve future outcomes. Some key metrics to follow are your profit/loss per trade, percentage returns, overall account balance fluctuations, gains versus losses, commissions paid, and any trading errors.
Tweak your trading plan over time by adjusting which stocks you target, ideal position sizes, and your Entries and exits. While new traders often make mistakes starting off, dedicated learners can continually evolve and succeed in the stock market over longer periods.
Continuing Your Stock Market Education
With the basics of how to trade stocks covered, we hope you feel well equipped to get started. That said, education should be an ongoing process for investors. The markets change constantly so traders always have more to learn. Following financial media, reading expert analysis, and expanding your general business knowledge can help take your stock trading skills to the next level.
And there you have it – a complete beginner’s guide to trading stocks including an overview of key terminology, how the markets work, what you need to get started, and basic tips for new stock traders. The journey may start small, but who knows…with the right approach, maybe one day you’ll make that fortune after all. Just remember to always put the proper risk management practices in place first and trade responsibly.
