How to Start Trading Stocks Online

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With online trading you can buy and sell stocks conveniently.
With online trading you can buy and sell stocks conveniently. (Image: Jupiterimages/Goodshoot/Getty Images)

Today, the vast majority of stock trades are done over the Internet. In addition to conventional computers, investors can use cell phones and mobile devices such as tablet PCs to trade stocks on the go. Commissions for online trades are far lower than what personal brokers charge. Furthermore, using the web to place trading orders means never having to wait on the phone to speak to someone, which can be a significant advantage in a fast-moving market.

Select a Broker

To start trading stocks online, you need a brokerage that accepts trade orders over the Internet. Today, practically all brokers allow you to trade online, but their user interfaces differ considerably. Before you chose an online broker, visit the web pages of each of the candidates and familiarize yourself with the kinds of features they offer, such as automatic stock alerts, customizable screens that display key data about several stocks at once, and mobile trading platforms that allow you to trade from your cell phone. The scope of relevant financial news you can access for each stock is also critical. The ability to conduct your stock research directly from the broker's website will save you time. Also find out about the commissions they charge per trade and ask if they offer discounts to frequent traders. When you have a question, do not hesitate to call the brokerage's customer service center.

Mail the Application

Once you settle on a broker, either download and print the account application forms, or -- if you do not have access to a printer -- ask the broker to send you these documents. Unfortunately, you cannot complete this step over the Internet, because the broker must have your signature on record before it can grant you trading privileges. Once you fill out the application and mail it in, you will be notified via email, phone or a letter that your account has been set up.

Transfer Stocks and Bonds

If you have investment instruments such as stocks, bonds or options at another brokerage firm, you should transfer them to your new online broker. It is more convenient to use only a single firm for all of your investments, as this allows you to see your total net worth as well as all account activity on a single statement and prevents the need to familiarize yourself with the rules and restrictions imposed by two separate entities. To transfer your holdings into your new account, contact your old broker and follow the directions it gives give you, which likely involves faxing or mailing it an account transfer form.

Study the Market

Before you commit large sums of money into any trade, study the firms whose stocks you are interested in. Understand the strengths and weaknesses of each company and how its stocks behaved in the past. if you have never traded stocks before, keep your trades small. At first invest no more than you can afford to lose. While the price of any stock rarely goes down to zero and a total loss from any given investment is unlikely, the emotional roller-coaster of trading takes a while to get used to. Small trades also keep losses due to finger-errors to a minimum. It is far more common than you may assume to hit "Buy" instead of "Sell" or purchase the wrong stock in the heat of the moment.

Tips & Warnings

  • You always input the price of one share. For example, if you are going to buy 100 shares of company ABC at $10.00 per share, you input the price as $10.00 and NOT as $1000.00 which is the total amount you will pay.
  • You can setup an electronic fund transfer between brokerage account and checking account for quicker and easier fund transfer.
  • Do thorough research before investing in any company.There is risk invoked in trading stocks.
  • Avoid frequent trading online. For each transaction you have to pay a fee. Frequent trading will incur lot of expenses in fees.

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