Stock Trading Guide

Richard Montana | October 21, 2022

What are Stocks?

In simplest terms, stocks are an investment within a company. The stock of a company is made up of all the shares from which the ownership is divided between shareholders. Investors can buy and sell shares of a particular company to speculate in the price fluctuation of the stock. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. A person that holds shares of stocks is called a shareholder. When you buy one or several stocks in a company, you are not lending the company money and expecting them to pay it back to you with interest. Instead, you are buying a piece of ownership in the company, with an interest in the company being successful which can increase the value of your stocks.

If the company does well, you can sell your stock at a higher price than that at which you bought it and make a profit. If the company does not do so well and you wish to sell your stocks at a lower price than you purchased it, you would suffer a loss. Some stocks also pay dividends which is a benefit from earnings based on how many stocks are held by an investor. Investors can own stocks in multiple companies if they wish. The stock market operates via a network of exchanges including The New York Stock Exchange, The NASDAQ Stock Exchange and The London Stock Exchange.

The total value of a companies issued stocks is known as market capitalisation. The price of a share can change depending on economic factors, company performance and investor sentiment. When a company goes public and offers its stock for the first time, this is referred to as an initial public offering (IPO). An IPO or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail investors. Once on the stock market, these company shares can be purchased and sold by investors. Stocks are often purchased from other investors who are selling a stock rather than from the company itself. If you are looking to sell a stock, chances are you will sell it to another investor looking to buy a stock in the company.

The company can then use the money that they have raised through a stock offering to expand the business, purchase new products, offer new services or to clear debt. Companies will often sell shares in their business in order to raise capital for growth, expansion or to clear debt. Any company profits can be shared between stockholders through the issuing of a dividend or they can use profits to reinvest. Stocks that frequently issue dividends are called income stocks whereas companies who reinvest profits are called growth stocks. Some of the most popular stocks trade online include Adidas, Apple, Amazon, Google, Nike, Netflix, NVIDIA, Tesla, Vodafone, Uber, Walt Disney, etc.

Owning Stocks

The majority of investors will own what is widely referred to as “common stock”. This type of stock ownership includes voting rights and will possibly pay dividends out to investors on a quarterly basis. There are also some other forms of stocks to be aware of such as preferred stocks. A preferred stock is a form of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument.

Owning a stock does not entail that you get to make the big business decisions or have conversations with the directors on a daily basis. It means that you own a share in the company profits and losses. If the value of the company goes up, then so does the value of your stock. If the value of the company goes down, then the value of your stock would decrease.

Whilst owning stocks has historically shown to produce consistent returns, there is also significant risks involved and the value of stocks in your portfolio can decline. It is possible for stock prices to fluctuate for various reasons such as market volatility, company events, incidents, reports and more. This is why it is important to choose stocks wisely and try to keep as informed as possible with the latest stock market news.

There are long-term investors who can keep hold of stocks for a number of years and see them fluctuate over time. These investors may see individual stocks go up and down in value but the goal is for the overall value of their portfolio to increase in the long-term. Some of these investors will own a collection of stocks through a mutual fund or index fund, which basically pools different investment together into one collective investment. The S&P 500 for example enables investors to own a stake in all companies listed within that fund.

This differs slightly with stock CFDs (contract for differences) where you speculate on the price of a stock rising or falling without actually owning the stock. Many online brokers provide CFD stock trading.

What is the Stock Market?

In a nutshell, the “stock market” will usually refer to one of the major stock market indexes, such as the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite. It can also refer to individual stocks that make up the stock market as a whole.

Stock market indexes consist of a section of the stock market and the performance of these stocks combined is viewed as representative of the entire market. Whilst individual stocks within an index can increase or decrease in value, the overall movement of these stocks combined is what determines if the stock market has moved up or down. Investors who buy and sell stocks hope to turn a profit through this movement in stock prices.

How does the Stock Market Work?

The stock market operates via a network of exchanges including The New York Stock Exchange, The NASDAQ Stock Exchange and The London Stock Exchange. The stock market works in a similar way to an auction house where buyer and sellers can negotiate prices and trade stocks.

Companies can choose to list their stock on the stock market through an initial public offering (IPO). Investors purchase shares from a company’s stock which enables the listed company to raise capital and expand their business operations. Investors can then buy and sell these stocks among themselves, whilst the exchange tracks the supply and demand of each listed stock.

The supply and demand can help to determine the price for each company listed, or the levels at which participants in the stock market such as investors and traders are willing to buy or sell. The buy price is referred to as the “bid” whilst the sell price is referred to ask the “ask”. The difference between the bid and ask price is known as the “spread”.

When you buy or sell stocks through a broker, you will usually need to pay the spread and/or a small commission fee on top. Generally speaking, the lower the spreads and commissions, the more you could save on trading costs in the long-term.

It is much more convenient these days to trade stocks online due to the internet and choice of online stockbrokers. Before this, trading stocks would have commonly occurred in a physical marketplace.

Whilst each trade can happen on an individual stock basis, the overall stock prices frequently move together because of factors such as market news, political events, economic reports and other fundamentals. Investors will often track the stock market’s overall performance by looking at a broad market index like the S&P 500 or the Dow Jones Industrial Average.

What is Stock Market Volatility?

Trading stocks will always have an element of risk due to the nature of the stock market. These risks can be minimised by implementing smart money management and the right investment strategies according to your own individual goals and preferences. There are day traders who will look to buy and sell stocks on a daily basis whereas long-term investors can hold a stock for years to come.

Whilst the S&P 500 does have a historical average that is annualized to a total return of approximately 10% before adjusting for inflation, that does not mean the market will provide that on a yearly basis. Some years could be down greatly and some could be up just as significantly. These swings are primarily due to market volatility, or periods when stock prices rise and fall unexpectedly.

When you trade stocks, there is a chance you will get it wrong which can results in a loss. It is therefore imperative to ensure that you are investing safely and follow the markets as a whole. Never risk more than you can afford to lose.

What are Shares?

Stocks are divided up into shares which is the smallest denomination of a company’s stock. Each share indicates a portion of ownership in a particular company. Thus, each share of stock is equal to a piece of one particular company’s ownership.

A share is a unit of ownership in a company, mutual fund, financial asset, or trust – buying shares in a company provides the shareholder with equity in that company. Because you own a part of the company, as a shareholder you’re are entitled to a portion of the profits it makes, and these are paid out as dividends.

Companies issue shares as a means to raise money. This may be to finance company expansion, a new development, or to move into overseas markets. When you buy shares, you effectively become a part owner of the company. The bigger the investment you make, the bigger your stake will be in the company.

For example, if a company is worth $200 million, and there are 100 million shares, then each share is worth $2 (usually listed as 200c). Those shares can and do go up and down in value for various reasons, primarily due to supply and demand.

When someone says they have shares in a company, that are usually talking about owning stock in one particular company. However, when someone mentions that they have stocks, they can be referring to shares in multiple different companies that make up their portfolio as a whole.

Some of the large companies can have millions of shares which means that even if a person owns tens of thousands, it can still only amount to a small percentage share in the company of less than 1%. If there is a particular individual or entity that holds more than 10% of a company’s stock, they are defined by the Securities and Exchange Commission (SEC) as a principal stockholder.

Generally, shares are freely negotiable and transferable. As a shareholder, you can decide at any time to sell all or some of your shares to other investors. You can sell them – or buy them – at a stock exchange if the company is listed on a regulated market or in a private exchange (in this case, the transaction takes place between the vendor and the buyer).

The stock market is driven by supply and demand. For any share dealing to take place, there must be investors willing to sell their shareholding (providing the supply) and buyers wanting to buy them (creating the demand).

If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.

Shares Investing

Investing in shares means buying and keeping them for a sustained period of time in order to try and earn a profit. There are two main ways of making profit from shares of a company:

  • If the company grows and becomes more valuable, the share is worth more – so your investment is worth more too.
  • Some shares pay you part of the company’s profits each year, called a dividend.

In comparison to investors, traders will tend to buy and sell shares over the short to medium term and focus more on smaller market movements.

Shares Trading

Shares trading differs slightly from investing in shares. When we talk about trading shares, we are referring to buying and selling shares in companies on a more frequent basis. Shares trading allows traders to speculate on both falling and rising share prices without having to actually physically own the shares. This is usually done via share CFDs (contract for differences).

A CFD is a contract to between two parties to pay the difference between the value of the current price and future price. Share CFDs have become popular in recent times, primarily due to the increase in online trading brokers that have given investors access to quickly and easily buy and sell shares online.

When you buy or sell a share CFD, you are speculating on the price movement, up or down. You just need to choose the share you would like to trade and place your orders. Share CFDs can be bought or sold at any time as they do not have an expiry date.

For example, you think Apple shares are going to appreciate and you want to open a long position to profit from this opportunity. You purchase 200 CFDs on Apple shares at $160, so the total value of the trade will be $32,000. If Apple appreciated to $170, you make $10 per share, which is a $2000 profit.

Shares trading is a popular product for some traders for a variety of reasons. These include:

  • Speculate long or short on rising or falling share prices
  • 24-hour trading
  • Way to diversify a trading portfolio
  • Trade shares with leveraged positions

Trading global shares with a broker allows you to go both long and short on price movements in major shares from the UK, US, Asia, Australasia and Europe.

Depending on exactly what you’re looking to get out of your involvement in the markets, shares can be a stable and time-tested way to potentially earn a profit from price variations, with an underlying value of their own that will ensure your product should continue to carry value going forward.

How do Shares Work?

Companies that wish to raise capital will list their shares through the process known as an initial public offering (IPO). Once their stock is public, individual investors and institutions can start to trade the shares.

Traders who believe that a company will see strong growth may consider buying shares, ideally for a low price so that they can sell shares at a later date for a profit. On the contrary, traders who think that a company could be facing trouble may look to sell shares, aiming to make a profit if the shares dropped in value. If the trader is wrong and the shares move in the opposite direction to which they anticipated, this will lead to a loss.

What Moves the Share Price?

Initially, a company will set a price at which it will list on a stock exchange, this is known as its IPO price. After that, fluctuations in the share price are caused by changes in the supply of and demand for the stock.

Individuals will always be able to buy and sell shares trading on the stock market. However, the price is determined by the supply and demand from prospective buyers and sellers at any particular time. When there is high demand and many buyers, it can drive up the share price. If there is low demand and more sellers, the share price can decline.

Supply factors that affect share prices include company share issues, share buybacks and sellers. Share prices are likely to come down when supply is greater than demand, and when more investors start to sell.

Demand factors that can affect share prices include company news and performance, economic factors, industry trends, market sentiment and unexpected events such as natural disasters. Demand gives shares value. If there is no demand for a company’s shares, they will have no value.

There is always a limited supply of a company’s stock. A company can make the decision to issue more shares, or buy back shares from investors if they wish to reduce supply. However, the number of shares that are in circulation is always known.

Investing vs. Trading Shares

Investors generally buy shares outright when they are looking to hold shares for a sustained period of time to hopefully sell for a profit at a later date should they increase in price. A common phrase used when trading shares is to “buy low and sell high”. Investors can take positions over the long term, attempting to profit from share price changes as well as dividend payments.

Traders use derivative products that take their value from the price of the underlying market. These do not require that traders actually physically own the shares. This means that traders can speculate on rising and falling share prices but do not have shareholder rights or receive dividends.

In comparison to investors, traders will tend to buy and sell shares over the short to medium term and focus more on smaller market movements. This is usually done via share CFDs (contract for differences).

A CFD is a contract to between two parties to pay the difference between the value of the current price and future price. Share CFDs have become popular in recent times, primarily due to the increase in online trading brokers that have given investors access to quickly and easily buy and sell shares online.

For example, you think Apple shares are going to appreciate and you want to open a long position to profit from this opportunity. You purchase 100 CFDs on Apple shares at $160, so the total value of the trade will be $16,000. If Apple appreciated to $170, you make $10 per share, which is a $1000 profit.

Stocks vs. Shares

While some people use the terms stocks and shares interchangeably, there are some key differences between them.

Someone who owns stocks may hold ownership in one or more companies; someone who owns shares in a company has ownership of just one particular company.

The term shares could refer to holding shares in limited partnerships, exchange-traded funds (ETFs), real estate investment trusts and mutual funds. In a mutual fund, you own shares, but not actual whole stocks. You own a portion or shares of the stock held in total by the mutual fund. Stocks on the other hand, refer specifically to corporate equities, a type of security traded on a stock exchange.

Someone who owns stocks may own two different stocks of different values. However, someone who owns shares in a particular company may own multiple shares of the same or equal value. Stocks are usually always fully paid up but shares can be either fully paid up or partially paid up.

Stocks can be issued at any time by a company or companies needing to raise capital whereas shares cannot. Shares tend to have a nominal value, such as $5 a share, whilst stocks have no nominal value. Shares also have a definite number known as a distinctive number, whereas a stock does not.

Investing in Stocks

When a retail trader buys stock of a particular company, they are basically purchasing a share of the company. Whilst this does not mean that you will be involved with the companies every day activities, shareholders can have a right to vote at meetings if they wish.

However, the main purpose for investors to buy stocks is because they are looking to make a return on their investment. The primary ways in which this happens is when either:

  1. The price of the stock appreciates in value and the stock can be sold for a profit.
  2. The stock pays shareholder dividends which are payments made from the company’s revenue. These dividends are usually paid on a quarterly basis. It should be noted that not all stocks pay dividends.

The historical returns as an average from the S&P 500 which is a collection of approximately 500 of the biggest US stocks, is around 10%, This equates to around 7-8% annually once inflation has been accounted for. In theory, a stock investment of $2,000 30 years ago could be worth $16,000 today.

These numbers of course depend on numerous factors, including what stocks are purchased, the company’s success and the economic situation. Not all stocks will deliver this type or return, some could earn more whereas some could be a complete failure. Historical performance is no guarantee of future performance.

This is why many stock experts believe that it is important to not just buy stocks in one company but rather to build a well-rounded portfolio that includes various company stocks from different industries and locations.

What is CFD Stock Trading?

Most online stock brokerages will offer trading on stock CFDs. A CFD is a contract to between two parties to pay the difference between the value of the current price and future price. Stock CFDs have become popular in recent times, primarily due to the increase in online trading brokers that have given investors access to quickly and easily buy and sell stocks online.

A stock CFD is a financial instrument that allows you to trade and try to take advantage of the movement in the price of stocks (e.g. Amazon, Apple, Barclays, Vodafone, Tesla) without actually purchasing or owning the underlying asset.

When you buy or sell a stock CFD, you are speculating on the price movement, up or down. You just need to choose the stock you would like to trade and place your orders. Stock CFDs can be bought or sold at any time as they do not have an expiry date.

If you think the price of a company’s stock will increase in value then you could buy the stock. If you anticipated that the stock would drop in value, you could sell the stock. In both instances you are trying to make a profit from the difference between the price that you enter and exit the trade.

For example, you think Apple shares are going to appreciate and you want to open a long position to profit from this opportunity. You purchase 50 CFDs on Apple shares at $160, so the total value of the trade will be $8,000. If Apple appreciated to $170, you make $10 per share, which is a $500 profit.

You can choose to set an upper or lower price level (stop loss & take profit) in which to close the CFD trade or exit manually. CFD trading brokerages will offer leveraged trading and you can go short (sell) if you think prices will go down or go long (buy) if you think prices will rise. Overall, CFD stock trading is much more accessible to anyone who has a trading account with an online stock broker.

CFDs have become increasingly popular in recent years, especially for day traders who like to enter and exit positions on a frequent basis. The leverage that is available and low costs associated with trading stock CFDs online make them an attractive proposition to both retail and institutional traders alike.

What is an Online Stock Broker?

An online stock broker acts as the intermediary between you the trader and the exchange where the stocks are traded. Most brokers will not just offer online stock trading but also other trading instruments such as forex, commodities, metals, energies, cryptocurrencies, bonds, options, ETFs and more. Online stock brokers enable traders around the world to buy and sell stocks of global companies directly from the stock trading platforms they provide that run on desktop, web and mobile devices. This makes online stock trading easily accessible to anyone. You just need an online stock brokerage account with a broker of your choice and to download their stock trading platform. Once you have opened an account, you can add funds to it using a choice of convenient funding options and speculate on if stock prices will go up or down by analysing charts, placing and managing trades via the stock trading platforms.

Choosing a Stock Broker

We will now look at what factors we deem are amongst the most important when you are looking for an online stock broker. Some of the key factors that you should consider when choosing an online stock brokerage include:

Regulation

One of the most important things to be aware of is if the stock broker is regulated in the jurisdictions in which they offer their online trading services to. Not only is it vital to check that the broker is regulated, you should verify that the regulation is up to date by checking the brokers licenses number with the relevant regulator. Different regulators have a different set of rules and restrictions although most are put in place by the government to protect investors interests. Choosing an online stock broker that is regulated can give you account protection that you may not get with an unregulated offshore brokerage firm. Without regulation, there may be no help should the worst happen.

Platforms

There are a variety of different stock trading platforms available for trading stocks online. Some brokers will offer their own in house developed proprietary stock trading platforms whilst others will have licensed platforms such as the popular MetaTrader platform. It is imperative to choose a stock broker that either offers a stock trading platform which you are already familiar with or a platform that has an intuitive user interface so that it is easy to use. You will find that there are lots of MetaTrader brokers which gives convenient market access for manual and automated trading strategies

It would also be worth considering if all of the trading instruments that you wish to have in your trading portfolio are offered through the platform. You should make sure that it will be compatible with the devices you wish to use it on. Some online traders will need mobile stock trading platforms for trading on the go. If this is the case, ensure there is a version of the platform that is compatible with your mobile device.

Most stock brokers will provide traders with free online stock platforms although there are some who charge monthly and volume-based fees, usually for specialised trading platforms that have specific features a professional investor may need. That being said, the free stock trading platforms will most likely be sufficient enough for the average retail trader.

Finally, the best stock brokers will usually provide video and tutorial guides to help new traders learn how to use the trading platforms available to them.

Stocks

Online stock brokers will usually offer a range of individual stocks and stock indices for trading online. If you have any particular stock instruments in mind that you wish to include within your trading portfolio then you should ensure that it is offered by the broker. The more stocks that the broker has, the more choice you will have if you wish to trade other shares in the future. Some brokers will offer more instruments than others, thus it could be a good idea to consider if you wish to diversify in other stocks and markets (forex, cryptos, commodities, etc) they provide. You will find there are brokers who offer a combination of financial instruments.

Commissions

When trading stocks online through a stock trading platform, you may be required to pay commission fees for taking, maintaining and exiting your positions. It is worth noting that some online stock brokers will offer commission free trading but compensate for this by having other additional costs such as monthly fees for using their stock trading platforms or spread mark-ups. There may also be accounting fees and inactivity fees. Stock trading commission fees will need to be factored into your overall money management and trading strategy, along with other online trading costs. Discount brokers tend to have some of the lowest fees.

You should clarify all of the applicable commission charges and compare brokers to see which will save you the most in stock trading fees over the long term. It is important to be aware of all the broker fees to make sure they are providing good value.  These costs can vary significantly from broker to broker so it is important to consider the overall costs you will incur and the affect that will have on your money management.

Spreads

Most online stock brokers will charge a spread when you place trades on their stock trading platforms. The spread is the difference between the buy and sell price of the underlying asset that is being bought or sold. It is important to consider the cost of spreads in your trading strategy, especially if day trading stocks as the spreads can quickly add up. Some brokers offer fixed and variable spread accounts, some will offer commission free accounts but instead mark up the spread to make up for this. It is important to account for the spread when planning your stock trading strategy, especially if you are planning on using a scalping strategy.

Some stock brokers will get their spreads direct from liquidity providers (LPs) without any interference. Usually, the deeper and more diverse the brokers liquidity pools are, the tighter the spreads will be. Other online stock brokers act as market makers and will take the opposite side of your trade instead of putting it directly through to the LPs. This particular type of “dealing desk” stock broker will usually add a mark up to spreads in order to cover costs.

Swaps

If you hold a position with your online broker overnight then you will probably need to pay a swap fee. This is an interest fee for the procedure of moving open positions from one day to another, also known as the rollover. This is another cost to factor in to your money management planning. Some brokers offer swap free Islamic trading accounts that conform with Sharia law which allows Muslims to engage in online trading through their platforms.

Other Fees

Along with trading platform, spread, commission and swap fees, most stock brokers will charge additional fees that should be checked and clearly understood. Other fees that are worth considering include withdrawal and inactivity fees.

Leverage

Online stock brokerages will usually offer leveraged trading on stocks CFDs. Leverage basically enables you to enter a position larger than your account would be capable of opening without it. Whilst this can seem like an attractive proposition, trading leveraged stocks also increases risk. E.g. If your stock broker account has $5,000 of equity available and 1:5 leverage, you would be able to take a position size of $25,000 (5,000 x 5 = 25,000). You should opt for a leverage that you feel comfortable with as each stock trader will have a different risk appetite.

Order Types

Stock trading platforms should support a variety of different order types. Order types include market execution (instant), pending orders, limit orders, trailing stops, break evens, etc. If your online stock trading strategy requires specific order types, ensure that the broker you are considering supports these order types via their stock trading platforms.

Resources

Some of the best brokers will have an abundance of trading tools and educational resources to help traders of all experience levels with the efficiency of their online trading and to increase their overall stock trading knowledge. It is in the best interest of the brokers to offer the tools that will enable you to be successful and to keep using their online trading services.

Education

Some stock brokers also provide traders with educational resources such as videos and trading guides to help them improve their trading knowledge and skills. They may include detailed tutorials on how to use trading platforms which could be helpful for those who are new to online stock trading and need help to familiarise themselves with the different stock platforms available to them. If you are a beginner then you may want to look at our best brokers for beginners that have plenty of educational guides which can help you to familiarise yourself with stock market.

Tools

All stock platforms come with a good range of free built in trading tools to assist with your online trading, helping to improve overall efficiency and performance. These can include technical indicators for analysing charts such as a moving average, MACD, Bollinger Bands, RSI, CCI and many more. Some platforms offer fundamental analysis tools such as built in economic calendars to efficiently keep track of the latest market news releases. They may also have trading calculators to help with planning your trades. The more advanced stock platforms will have depth of market (DOM) with level 2 pricing and sentiment tools that show how many traders are buying/selling a particular instrument.

However, intermediate to advanced traders may require specialist trading tools for conducting thorough market analysis. If you require any additional tools, then it may be worth checking that they are provided by the broker. These tools can include specific technical indicators, economic reports, sentiment analysis, Trading Central, Autochartist, TradingView, stock screeners and more. If you require any specific tools or would find them beneficial, check that they are offered to traders by the stock broker and if they are free or come at an additional cost.

Funding Methods

You will find that different stock brokers will have different methods of making deposits and withdrawals from your online brokerage account. Whilst most will provide bank transfer and debit/credit cards, others will have online payment processor options such as Skrill, Neteller, PayPal, etc. Check that they have an account funding option that is convenient to you along with the costs to make deposits and withdrawals, if any.

Support

No matter how experienced the stock trader is, at some point they will need quick and efficient customer support for technical or general questions. Check what options are available to contact customer support along with the hours they are available and office locations. If you are located in Europe, you would ideally want them to have a European office or provide support 24 hours day if they are located outside of the EU. Ensure that support is available in your language and the different ways to contact them are suitable for your needs. The best stock brokers will usually offer online chat which can be more convenient to some traders rather than trying to reach them via telephone or email.

Signup

Each shares broker will have its own minimum deposit policy so check that you can meet this requirement. You may also need to provide some personal information in order to pass the brokers KYC and AML procedures. The sign-up process can be quicker at some brokers, especially if all of it is conducted online. During the sign-up process it is very important to make sure that you read all of the brokers terms and conditions, only proceeding if you understand and agree with them.

What is an Online Stock Trading Platform?

An online stock trading platform allows traders to access different global markets for speculating on the price movements of various trading instruments. This can include Forex, Commodities, Cryptocurrency, Stocks, Shares, Indices, Metals, Energies, Options, Bonds, ETFs and CFDs.

In the past, investors and traders would have had to go through an offline stock broker which meant that the markets were less accessible than they are today. As technology has improved over the years, there are now many stock brokerages to choose from. Anyone aspiring to be a successful trader can open a stock trading account with an online broker and gain access to the brokers stock trading platforms for online stock trading from anywhere in the world with an internet connection. Most brokers provide these stock platforms free of charge and for use on desktop and mobile devices.

Through a stock trading platform, you can view real time bid/ask prices of various assets and load charts that show the historical and current prices of chosen assets over multiple timeframes ranging from tick to yearly charts. You can add technical indicators to these charts to help identify potential trending and ranging market conditions. These indicators can provide stock trading signals and are often used as part of an overall stock trading strategy that involves technical, fundamental, sentiment and price action analysis. When you find a suitable trading opportunity, you can execute, manage and close your buy or sell position directly through the stock platform.

How to Trade Stocks Online?

If you have taken the time to read through the above, you should hopefully have an understanding of the stock market and how to trade stocks. Here is a summary of the key steps:

1. Decide if stock trading is for you

Trading stocks online carries an element of risk and can take more time than other forms of investing. You will need to research stocks, manage your stock market positions, follow market news and decide how to react to them. It is important to understand the risks and dedication that comes with trading stocks online.

2. Educate yourself

Before trading stocks, it is imperative to learn as much as possible about investing and the stock market. Any mistake could prove to be costly. There is an abundance of free educational materials provided by many online stock brokers that can help you to improve your trading skills and knowledge.

Most stock brokerages provide a free demo trading account so that you can practice trading stocks online with virtual funds in order to familiarise yourself with the trading platforms and practice your trading strategies until you feel confident enough to open a real trading account.

3. Choose a stock broker

In order to trade stocks online, you will need a broker account and stock trading platform to execute your trade positions through to the stock market. When choosing a broker, there are a few important things to consider such as regulation, commission fees, platforms, tools, education, funding options and customer support.

4. Research stocks

If you have made it this far then you may be ready to start trading stocks online! The next step is to research the different companies to discover which stocks you have an interest in trading. Perhaps there is a particular industry, product or service that is already of interest to you.

Many brokers will allow you to filter stocks according to various criteria in order to narrow down your search if need be. You can also use a dedicated stock screener, which usually has more advanced features and customizability to let you screen for stocks that meet your criteria.

Many traders will begin by analysing different companies, studying public information such as finances, earnings and reports from professional analysts. The best brokers should have this information conveniently displayed for you within their trading platform.

5. Have a stock trading plan

Some of the most important factors that can help determine stock trading performance can be the trading plan and discipline. It is important to have a solid trading plan personalised to your own needs that includes the money management and trading strategy that you will use. Most experts and professional traders would try to not let negative emotions such as fear, anger and greed affect their trading strategy.

6. Buy and sell stocks

Once you know what stocks you want to trade online, you can analyse them to help decide if and when you will place your trades. After placing a stock trade, you will need to keep track of how it performs and manage it according to your stock trading plan. Some traders will keep hold of stocks for the long-term, whereas others may buy and sell stocks on a daily basis.

Conclusion

Now that you have had a brief overview of what stocks and shares are and what to look for when choosing a stock broker, you may be considering opening an online trading account to trade stocks online. To do so, you will need to choose a stock broker, follow the account opening process and you will then be able to start trading shares online through one of their stock trading platforms.

Shares trading is a popular choice for active investors who would like to trade some of the biggest global brands. The wide range of stocks means that there is ample opportunity to look for trades. Shares trading can be suitable for scalping, day trading and swing trading.

You can start trading stocks online with just $1 depending on the minimum deposit that your chosen online stock brokerage requires. Due to the risks involved with trading stocks online or any other trading instruments, you should only ever trade with what you can afford and feel comfortable with as there are no guarantees in trading online. Most experts would suggest trading on a demo account with virtual funds to begin with.

Successful online stock trading can take years of practice. Stock trading requires immense dedication, patience and discipline. According to our thousands of hours of in-depth research across hundreds of online stock brokers, most online stock traders actually lose money.

Take your time to research brokers and do your own due diligence, the above information is only for educational purposes and not advice. Please feel free to view our best stock brokers if you need some further inspiration.

About the Author

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Richard Montana
Richard has many years of experience in broker research, testing, analysis and reviews. He knows what to look for through years of trading himself with different brokers and listening to the feedback of others.

Review Methodology

For all of our broker reviews, we research, validate, analyse and compare what we deem to be the most important factors to consider when choosing a broker. This includes pros, cons and an overall rating based on our findings. We aim to help you find the best broker according to your own needs. You can read more about our review process.


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