How To Trade Stocks (Beginners Guide)

If you follow a few steps, you’ll be trading stocks like a pro in no time. 

Updated: January 15, 2024
Matt Crabtree

Written By

Matt Crabtree

 
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Learning how to trade stocks isn’t as difficult as it may sound. The idea of trading stocks makes a lot of people nervous, typically because they have no experience in the stock market. The nervousness is justified, because there is really a lot to know when it comes to how to trade stocks. 

But the good news is that there are plenty of resources, training, education, and even advice that you can follow to help you along the way. Whether you choose to use an online broker that offers tips and advice, or you want a full suite of tools and advisement that you can tap into, you have plenty of options.

 If you follow a few steps, you’ll be trading stocks like a pro in no time. 

What is Stock Trading? 

Let’s start at the beginning. If you want to learn how to trade stocks, you first need to understand what that really means. Trading stocks is simply the act of buying or selling stocks that are available on a trading market or platform. 

Stocks have prices that are constantly changing. They can change drastically in just a few moments in some cases. The market (and most stocks) will have up days and down days. As a stock trader, it will be up to you to watch this, and attempt to determine when is the best time to make your trades, regardless of whether you are buying or selling. 

In general, you want to try to buy low and then sell high if at all possible. Of course, this is based on your best educated guess based on the stock and the market at the time. 

There is risk to trading stocks.

If you decide you want to trade, you need to be able to handle the highs and lows of doing so. Also, be sure to invest wisely, not risking money that you need to have available to you. 

Now, check out these tips to trade stocks.

Open An Account

Of course, the first thing that you need to do when you are looking to start trading stocks is open a trading account of your own.

The good news when it comes to this step is that there are so many options for you when it comes to starting your trading account. Now more than ever, there are so many brokers that are available online, all with their own set of features, accessibility, fees, and offerings to let you choose what works for you. 

The bad news is that the amount of choice you have might be downright overwhelming. You might not be sure which is right for you and the thought of having to do your own research and figuring out which is the one you will select might be daunting. 

However, it is very important that you make the right choice because this is quite literally your life and your financial well-being on the line. You need to make sure that you find a broker that gives you everything you want and leaves nothing to be desired.

Is your new broker easy to use? Is it intuitive and easy to navigate? Does it offer low fees so you won’t be spending an arm and leg as you make your investments and buy and sell and trade? More importantly, does it offer all the sorts of stocks that you are looking for? Does it work in your home country? 

These are all the sorts of questions that you should be asking yourself when you are trying to make your trading account for the first time.

You need to make sure that whatever broker you settle upon is one that you can see yourself using often, with ease, with excitement, with possibility and many features that you are pleased with. 

If you aren’t sure, there are plenty of reviews out there about online brokers that will give you good insight into which sites and apps are best for you when you are starting your stock trading career. 

Read — A Lot

Now is the time when you should really dive head first into trading and the world of investing.

You should learn — and you should learn a lot.

In fact, you should try to treat investing like a full time job and put as much effort and energy into it as you would a new profession. You should be learning as much as you can about stocks, about the market, about everything associated with it.

And why is that? That’s because trading is all about knowing the market like the back of your hand. It’s about understanding it and knowing it so well that, ideally, you can predict what is going to happen within the marketplace in advance.

This won’t happen overnight and it won’t come easily. There are plenty of things for you to read, such as newspapers and business sections of your favourite news sites. Then you can also be watching a lot of business news, which will give you a steady stream of the latest information that will impact and influence the stocks that you are going to buy.

You can also read some time-test, well-respected books about trading. This will give you a good idea about the concepts and methods that so many established and successful traders have used over time.

Some of the most well-known books related to trading are Technical Analysis of the Financial Markets by John Murphy, Trading for a Living by Dr. Alexander Elder, Winning on Wall Street by Martin Zweig, and The Nature of Risk by Justin Mamis. 

All of these will give you a very in-depth, informative look at the world of investing and will also give you some solid pointers and guidance when it comes to taking this lifestyle seriously and making the most of it.

You should be following the market every day to learn as much as you can. You might need to wake up a little early depending on where you live but it will be well worth it. Reading a lot and learning a lot will teach you what to look for, who to trust, and what to be aware of when you are studying the world of investing. 

Analyse

What are you supposed to do with all the information that you are gaining from reading and watching a lot of news and information about investing? You are supposed to analyse it!

Analysing all of this is like looking at charts, graphs, and technical analysis. It can be a bit tricky. That is why the more practice you have, the better. You will soon be figuring out what you need to be looking for, and you will also be determining what influences the marketplace the most. 

You want to watch the price of certain stocks and see how world events and other stock performance affect them.

You need to study the fundamentals of the market and see how every action on the market has a reaction too. Everything is connected, everything works together. Nothing exists in a vacuum when it comes to investing. 

This will help you become comfortable with the ups and downs of the market and will also give you a lot of experience of seeing trends and what causes them. This will essentially make you feel ready to make your own trades, especially at the right moment.

Buying and selling in a market is all about timing and when you analyse all of the data you are compiling, you are learning how to time things correctly. 

Practice

Paper trading is another way of talking about virtual trading. This allows people to try out trades that they’d want to initiate on the market, but it does so without any real risk.

It is like trading on the market with fake money. But even though the money is fake, the upsides are not. You will be able to see how the stock reacts after you put your fake money in and you can learn a lot. That will prepare you for the real thing.

Invest

Now is the time for you to put your real money where your mouth is. 

When you are ready to actually invest, you need to log into the account of your choice and then make sure that the account is tied to your bank account. From there, you will be able to find the stock of your choice, choose the number of shares that you’d like, and then make your first purchase.

It’s really that simple. When you buy shares in a stock, you will not be able to watch the stock’s performance in real time and watch it as it either rises up or falls in the days and weeks ahead.

You will be able to do all of this from your account’s dashboard, and reading the market and your stock’s performance will be a lot like looking at a graph.

Watch The Market

Now that you own the shares that you want, it is important that you keep a close eye on them and only make moves out of a place of knowledge and experience, not out of fear or too much caution.

Some people will move too quickly with their stocks.

At the first sign of trouble, they will jump ship and sell all that they have. Meanwhile, other people will be too cautious and will hold on dearly to their stocks as the value continues to drop lower and lower.

Using the analysis that you have learned and the knowledge you have gained from your experience and reading, you will be able to make the right choice — holding onto your stocks for not too long or not too short a time. 

Some people want to hold onto stocks for a long time, some people want to hold onto them for a short amount of time and turn a quick profit. You should be well aware of the type of investor you want to be and act accordingly.

Whatever sort of investor you want to be, it is vital that you stick to the plan you have made for yourself and do not act out of emotion when you are investing. 

Mitigating Risks in Trading Stocks

Keep in mind that there is no possible way to guarantee you won’t have any risks or losses. But you can be proactive to help mitigate your risks, and simply better understand what you’re up against when trading. 

Here are some helpful hints to help you. 

Maintain Good Records

Sometimes, you simply don’t realize how much you have invested, or how much you have lost, unless you are tracking it along the way. When you invest, you receive statements regularly. You also will receive tax forms for any gains or losses that have to be claimed. 

It is important to know that gains will be taxed, and losses can sometimes help offset those gains. The tax laws are very detailed. However, we recommend keeping good records simply for your own tracking purposes. This is the best way to understand how much you have put in, and how much you have really returned with your efforts. 

Hot Tips Aren’t Always So Hot

Everyone is always looking for the next big way to make a few bucks. In the stock market, that often comes from using hot tips, and jumping on what sounds too good to be true. Here’s the thing. When it sounds too good to be true, it most likely is. 

Sure, there are times when it pays off, but there are more times when it doesn’t. Instead of buying into those hot tips, take a steady approach to reliable knowledge from trusted and approved resources. The best place to find these are usually on the resources provided by your online broker, or other similar resources. 

Take it Slow and Steady

You don’t have to rush in and buy a ton of stocks all at once. You also don’t have to purchase high levels of a stock just because it seems like a great deal. You don’t want to be over saturated on any one position.

It’s much better to spread things out, and build up your portfolio slowly. 

Look for stocks that meet your needs, such as looking for ETFs or high dividend positions when you need some income from your portfolio. Mix it up, and spread it out. That phrase that says don’t put all your eggs in one basket really refers to things like this. 

For example, don’t put all of your investment money only in one single stock. It’s better to diversify, even if it is only across 2-3 stocks to get you started. 

Can You Trade Stocks if You Only Have £100 to Invest? 

The great thing about many of the new online broker platforms is that they don’t have minimum requirements to invest. As long as you have enough funds to purchase shares, then you can invest. In fact, some companies even have the ability to purchase partial shares, but be aware that isn’t always the case. 

As long as your £100 is enough to cover the specified number of shares, as well as any trading fees, then you can trade stocks with it. When you’re able, you can always add more to continue building your portfolio. 

Final Thoughts

Learning how to trade stocks isn’t terribly hard. What you really need is to understand where and how to find the most trustworthy resources for your trading activities. How and when you choose to trade is totally up to you. There are plenty of choices out there, and a great variety of online brokers to choose from as well.

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