How to Trade Stocks Electronically
Years ago, before the advent of personal computers, if someone wanted to buy and sell stock they had to contact a broker and set up an account. Every time they wanted to buy or sell they would have to call their broker and pay a fee for each trade, which in some cases could be hundreds of dollars. These days an investor can set up an account with an online broker in minutes and pay just a few dollars a trade. Of course the investor forgoes the advice of an expert, but for many this is a very viable option.
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Instructions
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Open an online trading account with one of the many discount online brokers. A few of the more popular ones are TD Ameritrade, Scottrade or Schwab. Most discount online brokerage accounts take only a few minutes to set up and some are able to be funded directly from a savings or checking account. The fees charged by online discount brokers can be as low as $4 a trade.
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Learn how to use the online brokers website. It is very important to make sure the trading tools that are available from the online broker are understood by the investor. The better the investor knows how to operate the trading tools the better chance he will has of executing successful trades.
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Trade active stocks and trade with the trends. This is also sometimes called following the money. Since the stock market is driven as much by traders' perceptions of what a stock is worth as it is by what a stock is actually worth, the savvy investor will invest with the trends. Stocks that are experiencing a large volume of trading usually have some news that's driving them and an investor should get onboard with these stocks to make gains.
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Define the level of risk that is acceptable. An investor must determine where he will sell the stock in either a loss or gain situation. On line accounts will have a facility to place what is called a stop loss, which is simply a price that the stock will automatically sell at to prevent any further loss. If the stock is in profit the investor can set the stop loss price as his principal investment, so no matter what happens the worst he'll do is break even.
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Develop a strategy and stick to it. Whatever strategy the investor employs he should stick to it and not be influenced by the emotionalism of the market. Some investors sell when a stock reaches 20 percent profit no matter what, in this way they always secure that profit. Conversely an investor may have a strategy that he's not willing to ever lose more than 5 percent on a stock and he'll set his stop loss accordingly.
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