How to Trade Stocks in Three Easy Steps
Investing is one of the best ways to start building wealth. And one of the easiest places to start is with this question: How do I trade stocks? The reason here is simple. There are all kinds of ways to invest. There is property and real estate. Fixed interest and bonds are other ways to invest. There are ways to invest now and create passive income streams. But among these possibilities, stock trading is probably the easiest to use. Here’s why…
For the most part, entering the real estate market is expensive. It takes a fair amount of money to get started. And the bond market can be difficult to navigate. This does not mean that it is impossible by any means. However, it also usually requires a large initial investment in order to start collecting interest payments. While this isn’t always the case, it usually takes more time to reap the loot of the effort.
Then, of course, there is stock trading. This is preferable for new investors as the entry price could not be lower due to fractional shares. Even if you wanted to invest in a mega-capitalization stock like Amazon (Nasdaq: AMZN), you can start with less than $ 5. Of course, you would end up with just 0.0015 shares. But if Amazon’s stock price doubled, so would your investment. Plus, commission fees are a thing of the past. So, for the most part, all the money spent on an investment goes directly towards that investment.
These two points have proven to be revealing in the investment world. They democratized investment. And that made the border virtually obsolete.
Getting started: how to trade stocks
The first step in answering the question of how to trade stocks is to create a brokerage account. This step can seem daunting. But it is quite simple. And if you want a little bit of advice on where to start, you can check out our list of the best online brokers through this link. And to keep things simple, you can also start trading stocks by downloading an app on your phone.
Once you have chosen a brokerage, you will need certain information to create an account. The information needed may differ slightly from one brokerage house to another. But here is a basic list of what is needed to create an account in order for the brokerage to comply with the regulations:
- Social security number (or tax identification number)
- Phone number
- E-mail adress
- Date of Birth
- Driver’s license, passport, or information from other government-issued ID
- Employment status and occupation
- Whether you are employed by a brokerage firm
- Annual revenue
- Net value
- Investment objectives and risk tolerance,
It may sound like a lot. And maybe a little intrusive. Corn these are the rules set by the United States Securities and Exchange Commission.
Once you’ve created your account, it’s time to fund it. For this step, most brokerages have two options. They either allow a one-time deposit or can facilitate recurring deposits made on a regular schedule. Either works. But if you plan to take investing seriously, it may be worth setting up recurring deposits. It just ensures that a fixed amount will be used for investment purposes on a regular basis. However, if you’re not quite ready to take this step yet, you can make a one-time deposit now and set up recurring deposits later.
Now that you have money in your account, you are technically ready to start trading. But it will help to learn some basic strategies from the experts before “YOLO” your hard earned money with the latest memes stocks.
A little know-how before you start
The truth is, you don’t need much more than a few dollars and an Internet connection to start investing. But that’s probably not the best route to financial freedom. Building wealth begins with a solid foundation. It is best to learn as much as possible about how the stock market works. before throwing your money at random stocks… which brings us to the importance of education.
Just because you know How? ‘Or’ What trading stocks does not necessarily mean that you are ready to start trading. But there are plenty of stock trading courses to start building a foundation on which to trade.
We have also developed a comprehensive U investment master plan for new investors, which can be found here.
These are all invaluable resources for those who are ready to start investing. And they do more than just answer the question of how to trade stocks. They teach new investors how to properly trade stocks. And being one step ahead of the competition is essential for success.
Once you’ve got the basics right, we recommend an extra step before you put your money on the line.
Simulate before you try to boost your bank account
Once you’ve made a plan, there are all kinds of ways to test that plan – it doesn’t mean wasting your money. One of the easiest ways is paper trading. It is a way to practice buying and selling stocks, options, exchange traded funds or other financial instruments in a simulated environment. It’s a smart way to get your feet wet, making trades without placing them in the live market. And it’s a great way to test the lessons you’ve learned from all the stock trading courses you’ve taken.
The term “paper trading” derives from the practice of tracking paper transactions. Practitioners would then keep track of their investments in the practice on paper. But nowadays, there are much simpler ways …
Today you can let the computer keep track of your exercise trades for you. Here is a quick list of some of our favorite online stock trading simulators. These make the practice much easier. And their interfaces look a lot like a real brokerage account. They are therefore also a great way to learn the process of trading stocks in a real-time environment.
You are now ready to start trading stocks
The learning curve can be steep. But it promises to be education that pays well. If there’s anything worth learning, it’s how to put your money to work … and make more money.
But your journey isn’t over once you figure out how to trade stocks. For many, stock trading is a gateway to even more lucrative hobbies. There is options trading, futures trading, forex trading, etc. And once people get bitten by the stock trading bug, many go into day trading – which is a full-time job in itself… but it can be very lucrative. .
But even if you may not be interested in these other styles of investing, there is always more to learn … even if it is all about trading stocks. There are a myriad of trading strategies for short term traders. Long-term buy and hold traders also have their own strategies. And you can choose the ones that are as traditional or technical as you want.
How to trade stocks: the result
Learning to trade stocks can be a huge effort. But the payoff is even greater. And remember, practice makes perfect. There are all kinds of anecdotal stories about traders who just have “the knack” for picking stocks. But for most of us, trusting our instincts is a recipe for disaster. To be successful and make money trading stocks, you need a plan. And it takes discipline to stick to that plan.
Don’t make the same mistake as me. I thought there was no way one of America’s biggest automakers could go bankrupt. Especially not at a time when banks were receiving huge bailouts to stay afloat. Instead of being careful or doing more research, I trusted my instincts. And my gut made me lose my entire investment in General Motors.
If you are looking for more advice and a plan to follow, we suggest you sign up for the legendary Alexander Green’s stock picker Freedom through wealth e-letter. He has successfully helped guide dozens of readers on their journey to financial independence. All you need to do to start your journey is enter your email address in the box below.
About Matthew Makowski
Matthew Makowski is Senior Research Analyst and Writer at Investment U. He has studied and written about the markets for 20 years. As comfortable with identifying value stocks as he is with discounts in crypto markets, Matthew started mining Bitcoin in 2011 and has since focused on cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog Dorito.