How to Trade Stocks Online for Beginners

Using the services of an online stockbroker is by far the most convenient way to purchase stocks. You’ll be able to buy stocks through the broker’s website in a matter of minutes after you’ve set up your account and deposited money into it. The use of a stockbroker who provides a comprehensive range of services is another alternative, as is purchasing shares of stock directly from the corporation.

 

It’s just as simple to open an online brokerage account as it is to open an online bank account: You will need to supply a valid form of identification, fill out an application for an account, and decide whether you will fund the account by sending a check through the mail or by depositing cash electronically. 

When you have finished opening and funding your brokerage account, it is time to get down to the business of selecting stocks to invest in. Researching businesses that you are already familiar with from your previous activities as a customer is a smart place to get started.

 

As you perform your study, make sure you don’t let yourself become overwhelmed by the avalanche of data and the real-time fluctuations in the market. Keep the goal straightforward: you are seeking businesses in which you would like to acquire a stake and become a part-owner.

 

“Buy into a company because you want to own it, not because you want the stock to go up,” is one of the most famous quotes attributed to Warren Buffett. Because he adhered to the rule, he’s done very well for himself recently.

 

After you have located these businesses, it is time to undertake some preliminary investigation into them. Get started by reading the annual report of the company, more specifically the annual letter from management to shareholders. The letter will offer you an overarching narrative of what is going on with the company as well as context for the data that are shown in the report.

 

After that, the vast majority of the data and analytical tools that you need to evaluate the company will be made available on the website of your broker. These will include SEC filings, conference call transcripts, quarterly earnings reports, and recent headlines. The majority of online brokers also offer tutorials on how to make use of their various tools, as well as fundamental lectures on how to choose equities.

You should not put even the slightest amount of pressure on yourself to buy a specific quantity of shares or to fill your entire portfolio with a single stock all at once. You might want to get your feet wet by beginning with paper trading or a stock market simulator. You can learn how to buy and sell stocks using pretend money by participating in paper trading. Alternately, if you are prepared to put down actual money, you can begin with a very modest investment. You may start out by buying only one share to get a feel for what it’s like to own individual stocks and to determine whether or not you have the intestinal fortitude to ride out the bumps in the road with minimal disruption to your sleep. As your confidence as a shareholder grows over time, you will have the opportunity to increase your stake in the company.

 

Fractional shares are a relatively new offering from online brokers that allow you to buy a piece of a company rather than the complete share of that firm. If you are just starting out in the stock market, you may want to take into consideration purchasing fractional shares. That translates into the fact that you can purchase pricy stocks with a far more modest financial commitment. There are a number of brokers, including eToro that provide fractional shares.

 

A great number of brokerages provide a tool that can convert dollar quantities to share values as well. If you already know how much money you want to put into an investment — let’s say $500 — and you want to know how many shares that amount can buy, this can be beneficial.

Share trading can grow money faster than a savings account. Since the first stock exchange, the market has returned 10% annually, while a savings account averages 2%. The S&P 500’s average yearly return rose to 13.6% between 2010 and 2020, according to Goldman Sachs. Successful traders can even wager on dropping prices using stock shorting provided they make the proper judgment.

 

Remember though a bad trade can cost you money, but there are techniques to reduce that risk. The more you read the market, the better you’ll detect a rising stock.

eToro trading and investing online trading academy offers all the training resources you need to start trading online for beginners. Even if you’re a novice, intermediate, or advanced trader, you’ll discover important information and tutorials including videos and even live classes.