How to Get Started in Stock Trading
The Internet and digital technology has enabled anyone--not just the white-collar crowd--to trade stocks and earn serious money. The only requirements are Internet access, a brokerage and an online stock account. Intangibly, you should amass as much knowledge as you can about stocks and markets before you make your first trade. Nevertheless, you will certainly learn most by doing, so join an online brokerage and launch your trading career using the following steps as your guide.
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Instructions
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Know the language of stocks, the stock market and trading. Do you understand terms, such as the stock exchange, ticker and the Dow Jones Industrial Average? Unless you are well-versed with industry language, you will not be a very effective stock trader.
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Find a brokerage. Using a brokerage is absolutely necessary because it is the entity that actually buys and sells your stocks, at your behest. There are two major kinds of brokers: direct-service brokers (which charge high commissions and are best suited for the experienced trader) and discount brokers (best for the novice trader). Fortunately, there is no need to visit a brokerage since you can join one online, such as at E*trade or Fidelity.
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Consider the stocks you want to trade. You can choose any companies listed on the NASDAQ, NYSE, OTCBB, AMEX stock exchanges. As a beginner, you should diversify your stocks until you get a feel for which companies are poised to perform well and give you more returns.
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Invest a minimum lump sum to enable your trading account with your broker (which will hold your trading earnings). Most online brokerages are discount brokerages, and specify fairly small minimum lump-sum amounts (such as $50). You could invest more than that if you wish, but it is better if you don't exceed $1,000 until you have gained more experience.
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Monitor the stock exchanges on the Internet and on TV to gauge where your money stands. Remember, if you have a discount brokerage you are limited to about 10 trades per month, so choose wisely when you want to buy or sell a trade.
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Tips & Warnings
Make your first trades with companies whose industries you know. For instance, you could trade stocks in Microsoft if you have knowledge of computer programming. Before you venture to a new stock, do your research and try to stick to stocks whose industries you enjoy learning about. Make stock trading extra fun by joining an investment club, or starting your own. This club consists of members who are all dipping their toes into stock trading and can learn trading together. You may also want to try using a virtual stock portfolio before signing up with a brokerage. A virtual portfolio allows you to trade virtual stocks and get investor feedback from your trades. You can find a free virtual portfolio at Wall Street Survivor.
Steer clear of Internet resources that tell you such and such a trading maneuver will earn you top dollar. Stock trading is always something of a gamble, because risk is a natural part of the stock market and no profit is guaranteed.
