PRIORITY 2 – Stock trading is a complex practice – some study for years to gain a basic competency. However, some also trade stocks casually or as a long term investment which is easy enough to learn at home. The difference between these two types of traders is the level of knowledge they need. There are a number of ways to learn how to trade stocks at different levels and for different competencies. This article outlines ways in which you can learn to trade, whatever your reasons for doing so. Firstly, let’s look at the types of trading in a bit more detail.
Types of Stock Trading
Stock trading Is defined as the buying and selling of shares of a particular company – to put it simply, if you own stock, you effectively own a piece of the company. The stock market is typically made up of buyers and sellers – for every buyer, there’s a seller. When there are more buyers than sellers (demand), the stock price generally increases, and when there are more sellers than buyers, the price often falls.
Stock trading has two main types – passive and active. Active trading refers to an investor placing ten or more trades per month, taking advantage of short-term events (either a company or market level) to turn a profit in the following weeks. Day trading refers to the strategy used by traders who buy, sell and close their stocks in a trading day to turn a profit in the next few minutes, hours or days based on daily price fluctuations.
Passive trading involves buying and selling stocks to return a consistent level of return over a longer period. Whilst there are fluctuations year on year, the % return on stocks and shares is generally significantly higher than if you left that cash in the bank, making this asset class the most popular for those looking for long term gains.
Open a trading account
To trade stocks, you need to fund a brokerage account. A brokerage account is a specific account designed to hold investments. If you’re going to be wanting to learn how to trade stocks you’ll need a brokerage account. If you don’t already have an account, it’s easy to open one online with a broker.
Studying the trade stock market (reading books, articles)
Financial articles, books and YouTube tutorials all provide a plethora of information about the stock market, and the majority of it is free! Books and articles are a great source of information for learning how to trade stocks. Studying all areas of the stock market is invaluable if you’re serious about trading stocks, as it can open up a whole new world of opportunities for you and your business. However, these resources are not enough if you want a career in stock trading. If this is your aim, or if your job involves knowledge of stock markets, you’ll want to take a professional and fully accredited course.
Complete a course on how to learn to trade stocks
Whether you’re an experienced practitioner or aspiring stockbroker, completing a professional financial trading course online is a great way to enhance your knowledge and boost your CV with the key skills necessary to show your knowledge. It’s also the only route into being recognised as a stockbroker or for other related career pathways. As a stockbroker, you’ll need to ensure you can show the following skills, and a course is a great way to learn them:
- Knowledge of how the stock market works
- Strong negotiation skills
- Ability to operate in a high-pressure environment
- Decision-making skills
- Strong numerical skills
- If you’re looking for a credible financial trading course, view our courses here.
Make use of practice trading accounts
Practice trading accounts are a great way to put what you know into practice before diving in with real money. Just like actual accounts, practice accounts allow you to learn to buy and trade stocks with pretend money, allowing new traders a great free opportunity to learn how to trade stocks online without the risks involved.
Find a mentor
Whether you’re entirely new to the world of stock trading or have been trading for many years, finding an experienced mentor can be a fantastic way of helping you approach stocks differently. Before you find a mentor, you should first consider why you need one and whether you’re ready. Your mentor could be a co-worker, a lecturer or just someone more experienced than you in the stock market trade. A good mentor will help guide you, recommend valuable resources, open your mind and keep your spirits high when things get tough.
There are plenty of great ways to find a mentor, such as online forums, local trading and investing groups, and online communities. You’ll often find that these groups have established members with a whole host of market knowledge who are happy to help those less experienced than themselves.
Study the professionals
Reading books and articles about influential investors from past and present helps provide some great insights into the stock market as it helps you gain a real understanding of how stocks work, how to avoid common risks and mistakes and how to build your portfolio. Whether you’re new to investing or are well-experienced, there are plenty of fantastic books and resources out there to help you make the best out of your investments.
Keep up to date with the stock market
News sites such as MarketWatch, CNBC and Bloomberg are all great resources for keeping up to date with the ever-changing stock market. By checking on the stock market a few times a day and keeping yourself informed on the latest developments in the financial world, you will gain an understanding of economic trends and expert analysis.
Once you have created and funded your brokerage account, it’s time for you to take the plunge and start picking stocks. A great place to start is by researching some well-known companies that you’re already familiar with to help you decide where you want to invest your money. Once you have decided on your companies, take a look at their annual reports to shareholders to help you understand where the company is at and to provide a trajectory of their ambitions to help put into context their numbers. After that, you can use all the tools available to evaluate their business and decide whether or not you want to pick stocks.
How to trade your first stock
To trade stocks, the most important thing you need to do is open your online brokerage account and fund it. If you’re a novice, it’s likely you would start buying individual shares or an Exchange Traded Fund (ETF). EFT’s provide brokers with a wider, more diversified range of the stock market instead of investing in one single company.
Once you open and fund your online brokerage account, placing a stock trade can be broken down into the below easy steps:
- Choose whether to buy or sell
- Insert quantity
- Insert symbol
- Select order type
- Review order, place trade