More and more, people are looking to learn how to start trading stocks to supplement their income. Stock trading is a complicated process and it’s important to make sure you know what steps are necessary before you start risking your money.
We’ve put together a step-by-step guide on what you need to do to start trading on the stock market. We would advise you to read through this article a few times since there’s a lot of ground to cover.
When you trade on the stock market, you risk your money. While some traders see success, many lose more than they can afford. You should make sure that you’ve got a broad understanding before you start trading on the market.
- Define Your Goals
Before you even begin to look at brokers and stock options, you need to decide why you want to trade on the stock market.
- Are you trying to earn a little extra money on the side?
- Are you saving for your retirement?
- Do you want to turn this into a full-time job?
The answers to these questions, and more, are going to be crucial to finding success in the world of retail trading.
It’s important to do your due diligence before committing any money to online trading. There are lots of resources online, but it can be tricky to pick out what is accurate and helpful. It can also be difficult to figure out exactly what you need to research.
The topics that are important to research are:
- Types of trading
- Tradable instruments
- Types of brokers
- Trading strategies
- Trading platforms
Keep in mind what your goals and limitations are. If you’ve got extra cash that you’re looking to play around with, your decisions are going to be very different from someone looking to plan for their retirement. Once you have researched these topics, you’ll have an idea of the direction you should be going in.
- Choose a Broker
All trading is done through a broker. They will fill your orders and provide liquidity for your trades.
Every broker is different. They charge different commissions, provide traders with different tools, and cater to different markets. During the research step, you will have found some brokers that work towards your goals.
One bad habit of new traders is to automatically tend towards the brokers who charge the lowest commission, but this isn’t necessarily the right decision. It may be worth paying for the more expensive account if you get access to research tools or a superior trading platform.
- Open an Account
You’ve made yourself an expert and you’ve chosen your broker, now it’s time to open an account.
First, you must open your account. Follow the steps outlined by your chosen broker on their website. Most brokers have a minimum account requirement, so make sure you have the funds necessary to open an account before you start.
Then you’ll need to install the trading platform on your devices. Most large retail brokers have browser trading platforms, but downloading a desktop or mobile app is the preferred way of trading. Trades are executed faster and there is less slippage.
Most brokers have a one-day lead time to open an account, so don’t expect to start trading immediately.
Any good broker should give users access to a demo account. The purpose of these is to give traders a pool of virtual currency that they can use to familiarize themselves with the platform and to experiment with different trading techniques.
If you’re entirely new to trading, you need to spend a couple of weeks playing around with virtual currency and learning the ins and outs of the platform you’ve chosen. Using a demo account will give you the chance to iron out any kinks in your trading strategy before you’ve committed any of your money.
It should give you an insight into how well you’ve done your research, and allow you to choose a new broker or platform if you need to.
Traders should be aware that accusations are floating around, although none of them have been confirmed, it is said that some brokers inflate the earnings on demo accounts to make their product more appealing to potential clients. These are the kinds of things you’ll find out during your research phase.
- Start Trading
No matter how well you’ve done your preparations, nothing will prepare you entirely to live trade with real money. The best-laid plans of mice and men oft go awry. That’s why it’s best to start with small trades of minimal risk.
Common advice in trading circles is to never invest more than you’re willing to lose, especially when you’re starting. Don’t expect to make a profit from your first few trades. It’s more important to treat each trade as a learning experience than an opportunity to make a profit.
You’ve carried out all the previous steps and learned how to reliably turn a profit from trading, but it doesn’t stop there. The most profitable traders will tell you that staying profitable requires constant research and dedication.
If you’re going to turn trading into a full-time occupation, you’ll need to know when to switch things up. Some strategies will only be effective for limited amounts of time, and you’ll need to be quick to retire one and pick up another.
You also need to keep on top of economic news and learn how to pick out upcoming trends to beat the market.
If you follow these steps and keep learning, you’ll be sure to make a profit on the stock market.
Retail trading is becoming popular because companies are making it more accessible to everyday people, but not everyone is going to make a profit.
If you do your due diligence, cover your research, and invest wisely, you’re already halfway to success. Don’t let yourself be disheartened by bad trades, take them as a learning experience and carry on.
If you’re looking for extra reading, consider Market Wizards by Jack D. Schwager, a series of in-depth interviews with stock market experts.