Welcome to how to trade stocks. The website that aims to help you improve your trading and tell you the truth about the stock market.
We do our best to demystify the often confusing world of stocks and shares. It doesn’t have to be complicated, we go through it all in easy steps without all the unnecessary jargon.
We also compare different online brokerage services so you can be sure you are getting the best possible deal for your money.
New and updated articles:
Learn The Basics Before Trading Stocks
It is no secret, most people trading stocks lose money, especially new traders. I was certainly no exception.
The reason for this is often a lack of understanding of the stock market basics. It’s important to take your time to learn about different online brokers, different trading styles, risk management, strategy and much more.
I was all too eager to get started trading at first, I didn’t spend anywhere near enough time learning how to trade stocks.
This website’s aim is to provide helpful tutorials on the stock market basics to help you get started. Some of these I have written personally and others have been submitted by other visitors to the site.
If you have an article you feel will help the community here learn about stocks, please send it for inclusion on the site.
If they are less than stellar, we tell you rather than writing a bias review just to gain a few bucks commission!
We can help you find the right stock broker for your trading needs. The best stock broker for you can be completely dependant on your trading style. We aim to provide impartial reviews on these.
For many traders a discount stock broker is most suitable. A few of these offer trades for less than $5. However, some claim to be cheap but have hidden charges you may only discover after you have signed up and funded your online brokerage account.
These kind of fees really annoy me, so I have spoken to many brokers over the phone and live person to find out all their fees. I have included my findings in the online stock broker reviews section of the site.
The amount of money you give to your stock broker when you purchase stocks can have a massive effect on your trading results. You definitely want to be spending as little as possible on brokerage commissions whilst still ensuring you are getting an acceptable level of service.
Your Stock Trading System
As well finding a broker that gives you cheap stock trades, you need to use a good trading system. No system is perfect and wins all of the time, but a good strategy will consistently make you a profit in the long term.
When buying stocks, it is always imperative to be realistic and take a long term view. You are highly unlikely to get rich over night trading the stock market, but you have a great chance of being successful in the long term.
Invest in Stocks
These days it is hard to switch on your computer and go on the internet without seeing some ad promising to teach you how to invest in stocks and make a killing on the stock market. This theme is continued when you enter a books store where there is usually a whole section of the shop dedicated to teaching you how to invest in stocks and other similar investments.
There are many lessons that can only be learned by actually trading in the stock market however, you can not expect to become an expert just from reading a book or taking an online course. The most important lesson one must learn to be successful in the stock market is the ability to spot trends.
All bull and bear markets have winning and loosing stocks that will out perform their peers and the market as a whole. The most important step in learning how to invest in stocks is the ability to recognize when a companies stock is about to soar.
How To Invest in Stocks: Spotting Trends And Taking Advantage Of Them
The price of oil continues to rise and because of this certain stocks will gain momentum in the oil sector, as others perform in line with the sector as a whole, some will even under perform. This means that picking the correct stocks in a hot sector will require some careful planning, luck and some serious patience.
Investing will require you to consider all aspects of a business prior to investing including historical share price performance, current market and sector trends, and future prospects for the company. It is important that all three of these factors align with your investment strategy, goals and time frame for investing.
There are no guarantees in the world of investing, but careful research and planning can help you to mitigate risk in your portfolio, and position yourself for greater over-all success. If you feel uncertain you should ask a financial advisor for investment advice.
The Stock Market Is Not A Casino
Investing in stock is not a get rich quick scheme, despite what you may have herd to the contrary, and it will often take a long time to see any serious profit in your investments. This can range from several weeks to months or even years, so you will need to be patient to make this work. If you decide to be an active investor then you need to get into a core position then trade it actively.
You may deicide to look for the right time to buy and then wait for the stock to reach a certain price point before selling it off. That is not to say all positions can be profitable, it is not good sense to hold on to a loser for too long, you must have the presence of mind to cut losers loose after a set time period. This is even more important when you are learning how to invest in stocks.
In the stock market, timing is everything. Timing can mean the difference between a profit and a loss in the short term, as with good timing it is possible to turn a profit from a poor performer. This said, for the most part timing is heavily influenced by luck. Of course real winning stocks will always go up because buyers will always bid up the shares. Many investors add to their positions at such times particularly during dips in price.
What is stock trading?
Lots of business men and women are making money by investing in the stock market. But what exactly is stock trading and how can it make you money? Well, that’s actually a good question. It’s a very good idea to learn all about stock investing and trading before jumping in at the deep end. Trading a company’s stock can make you money if you buy at a low price and sell them later for more money.
It’s generally pretty easy to spot the people who are investing in the stock market. Most of them have a copy of the financial times clutched under their arm. Some people might make you believe that stock trading is very easy and a risk free investment.
No investment is without its risk. Investing in the stock market is very time consuming and is also fairly risky. You really should know your risk tolerance before you start investing. That said, if done properly it is possible to make quite a lot of money from it.
Types of Stock Trading
There are many different types of stock trading including long term buy and hold trading and scalping over small time frames. Let’s take a look at some of them in more detail.
Long term and hold investing
This is my investment style of choice. Long term buy and hold investing simply means you buy your stocks with the aim of holding onto them for the medium to long term. This is commonly a year to several years or even longer in some cases.
This type of trading offers the opportunity to earn returns over the longer term, with little need to focus on the short term volatility. This strategy works well for the majority of investors who can simply capitalize on the markets tendency to rise in value over time.
The main advantage of this buy and hold strategy is the very low time requirements. There are more successful traders who invest in the long term than any other type of trading.
Scalping stocks is where a trader aims to profit from very small price movements. Many scalping trades are open for as little as a few seconds.
Scalping is extremely labor intensive and often requires a trader to spend many hours a day trading, and requires constant monitoring of your securities in order to realize a profit.
As scalping stocks often means making a high number of trades, there is often the need for considerably large account size, otherwise the trading fees will be likely to eat into a high proportion of your returns.
To be successful scalping stocks you need to have a strict trading plan and stick to it. Considerable practice on a simulated stock trading account is highly recommend if you are new to scalping. It is essential to have your emotions firmly in check before scalping on a real money account.
Intra day Stock Trading
Intra day trading involves buying a stock but selling it during the same trading day. Intra day traders do not hold positions overnight.
Like Scalping, intra day trading requires strict discipline and a solid trading plan. This can be practiced on a simulated account. It is much better to make your mistakes with “dummy” money than on a real trading account.
Intra day stock trading is also very labor intensive and can be very stressful to many people, myself included. Intra day stock trading is sometimes referred to as “day trading”.
Swing trading is in between day trading and long term buy and hold investing. Typically swing trades are held from a day to a few weeks.
Swing traders use technical analysis and/or fundamental analysis to make their trading decisions.
Swing trading isn’t anywhere near as labor intensive as day trading and scalping but it does require a little more time than long term investing.
Normally when you trade stocks you will need to find yourself a stock broker. The stock broker will help you to buy and sell stocks. If you are using Dividend Reinvestment Plans, then you may not be as reliant on a stock broker.
There are quite a few different ways that you can invest in stocks. Some stock traders buy stocks and hold them for a long time. By holding it for a long period of time it has the potential to make the returns much greater.
Scalping is yet another type of trading. This is where traders try to profit from much quicker movements in the stock market. They try to make money from fairly small changes. It is possible to scalp during the same day.
Stock prices can fluctuate throughout the day. Although these changes are normally very small, it is sometimes possible to make money from them. Scalping is one of the more risky types of stock trading.
How Stocks are traded
Stocks are traded through a stock exchange. There are lots of different stock exchanges in different countries. These include the London Stock Exchange, New York Stock Exchange and Shanghai Stock exchange. The stock exchange connects the buyers and sellers of shares together.
It is possible to trade on the trading floor of many stock exchanges. However, this area is normally reserved for professional traders. Instead most trades are done over the internet.
Electronic trading is more convenient and less stressful. Computers handle all of the trades and there is a lot less shouting.
Why you need a Broker
If you want to buy stocks through a stock exchange then you will first need to register to be a member of the exchange. Registering to be a member of a stock exchange is generally very expensive. To reduce the costs a broker is helpful.
A stock broker already have a membership to most of the common stock exchanges. They can be used to buy stocks for you, and in turn you will have the ownership of the shares.
The majority of online brokers will charge a fee each time you trade stock. You will need to choose the right stock broker for you, not all of them are good.
How to pick individual stocks
Although investing in the stock market can be enjoyable and exciting, the main reason most people choose to invest is to profit. If you are serious about making returns from your investments in the stock market, then you will need to know how to select the right stocks.
The Stock Market
The stock market has certainly made lots of people rich, but it has also made many more poor. There are no magic answers to choosing the right stocks, otherwise everyone would be driving around in Bentley’s thanks to the stock market.
There are many different options that people have to invest their money. They can stick it in a bank account, or use bonds, stocks, ETFs (exchange traded funds) or mutual funds. Throughout the rest of this article, I will be concentrating only on investing in the stock market.
Before you can hope to invest in the stock market you will need to understand what they actually are. Stocks are literally a part of a company which can be sold. The company sells these stocks to raise investments for many different purposes. It is possible to buy stocks in any public limited company.
Not all companies can sell their stock or shares. They first need to be a public limited company and be registered with the stock market. There are stock markets in all major countries worldwide and all registered companies will be issued with a ticker symbol. This makes it easy to track the price of the stocks.
Companies offer different types of stock, the most popular types include blue chip and penny stocks. Blue chip stocks are considered to be some of the safest investments as the investments are normally more secure.
If the company has made a profit at the end of the financial year then the board of directors will decide whether or not shareholders will be paid a dividend. These dividends can be very rewarding and can even be reinvested by purchasing new stocks in the same company. Dividends may appear small, but they are certainly worth considering in your investment plan.
Choosing Stocks Yourself
The easiest way to choose stocks would be to get someone else to do this for you. There are plenty of brokers that you can employ. If you want to purchase stocks yourself without requiring a broker then you can try several different routes.
A lot of the big companies selling stock have direct stock purchase plans. These allow you to buy stock directly in the company without needing to pay additional fees to a broker.
Once you have purchased at least one share in a company you could also join the DRIP program. This is a dividend reinvestment plan which means any dividends that you would due to be paid, will be used to buy up additional stock in the company.
When you are learning how to invest in stocks you might want to buy fairly small trades. You can find a number of special services which allow you to buy individual stocks. You can buy a single share in each company so you can build your confidence and experience.
A broker is still an option that many people will choose. If you want to go down this route, then you will need to understand you will need to pay fees and commissions on each trades. Brokers are ideal for people who do not feel confident dealing directly to buy the stocks. It is also beneficial to have a broker if you have a large portfolio of shares. That said, even with a broker, investing in the stock market is not without its risks.
One final note
Before you start reading my stock market investing and trading site or begin trading, I just feel it’s very important to mention that I strongly recommend that you only buy stocks with money you can comfortably afford to lose. This is not to say you will lose money, but it’s better safe than sorry, right?