How to Trade Stock for Dummies

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For someone with little or no experience when it comes to investing, taking your hard-earned money and putting it in the stock market can seem difficult, and maybe even a little frightening. You might be afraid of not making the right investment, or losing your money to a crook like Bernie Madoff. While there are never any guarantees that you will make money on your stock market investments, with some time and effort into learning about investing, you can reduce the chances that you'll make bad investments.

  • Educate yourself about how the stock market functions. Two good free online sources are Investopedia and How the Market Works. On these sites, you'll find answers to basic questions about investing in general, and the stock market in particular, including definitions to terms that you might not know.

  • Pay attention to the news. To help improve your chances of becoming a successful investor, don't just read the business section of the paper, or watch business networks on television. Read stories about world events, politics, the economy, and trends in culture and people's lives, as these can all have an effect on how the stock market performs. For example, the threat of war in the Middle East can cause the stock market to go down, while tax cuts being passed can cause the market to go up.

  • Play a free online trading game to practice your investing skills. In the game on the How the Market Works website, you can use fake money to buy and sell real stocks in real time. You can have more than one portfolio, so you can use one for long-term investing, and another for day-trading. There's also a game where you can invest in foreign currency.

  • Decide if you're investing in order to try to make some quick money, or if you're investing for the long term. Also, try to determine what your tolerance for risk is. If you'll be agonizing over every little dip in the market, you should invest more heavily in stocks that tend to be more stable.

  • Decide if you're going to invest through a brokerage like Vanguard or Fidelity, where you'll have a broker buy and sell stock for you while providing advice, or if you'll invest through a site like E*Trade, where you'll buy and sell stock yourself.

  • Open your trading account, and begin to invest.

Tips & Warnings

  • Do research before you invest in a stock or a mutual fund. The more informed you are, the better the decisions you'll be able to make when you invest your money.
  • While the stock market has historically been a good investment over the course of time, there are no guarantees that your investments will pan out and you'll make money on them.

References

  • Photo Credit business charts with buy image by Andrew Brown from Fotolia.com
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