Quiz
How to start trading stocks online
5 Steps to Start Trading Stocks Online
ARIELLE O'SHEA, nerdwallet.com1. Decide on your strategy
What would you rather start trading with, individual stocks or funds? Trading individual stocks not only carries more risk, it requires more effort than investing in mutual or index funds. You need to actively watch your positions and understand whether and how to react to market moves. If you’d rather stay largely hands-off after all, then investing in a portfolio managed by a robo-advisor might be a better fit than trading individual stocks.
2. Get an education
Before you trade anything, learn everything you can about investing and the markets. Mistakes can be costly. There are a lot of free educational resources that teach how to trade through an online broker. Most stock-brokers offer their own educational centers and a staff of former traders or investment advisors who can guide you. Paper trading is also a great way to practice without money or risk involved.
3. Select an online broker
Choose an online broker with the tools and support to match your needs. In general, beginner traders should prioritize customer support, educational resources, and account and trade minimums. In addition, consider the online broker’s stock trading software. New traders will want a platform that is streamlined, easy to navigate, and incorporates how-to advice and a trader community of peers to help answer questions.
4. Start researching stocks
Your account is open, and you’re ready to start investing. What’s next? Picking stocks, of course, and that’s the hairy part.
Most traders start by doing a thorough analysis of a company, looking at public information including earnings reports, financial filings and SEC reports, as well as outside research reports from professional analysts. Much of this should be provided by your broker, along with recent company news and risk ratings.
Start slowly, picking one or two stocks and investing a set amount of money that you are prepared to lose. You can plow gains back into the stock — or into other companies — but don’t add more money to the pot until you know what you’re doing and can put research into other companies.
5. Make a plan and stick to it
Investing can be emotional, particularly for those new to the game. Losing money doesn’t feel good, and it’s easy to panic and pull out at the wrong time. It’s also easy to get swept up in the excitement of what feels like a winning stock.
That’s why it’s important to plan how much you want to invest at what price, and determine how far you’re willing to let a stock fall before you get out. Using the right type of trade order can help you stay on plan and avoid emotional responses. For example, stop-loss orders trigger a sale if a stock drops to a certain price, which can minimize risk and losses.
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DISCLAIMER
For information purposes only; not intended as financial advice