Stock trading: What you need to know to get started

Our experts answer readers’ investing questions and write unbiased product reviews (here’s how we assess investing products). Paid non-client promotion: In some cases, we receive a commission from our partners. Our opinions are always our own.We all want to be the next person to win big with a lucky stock trade. Unfortunately, this isn’t in the cards for detikindonesia.id most traders. In reality, it takes a lot of knowledge, research, discipline, and patience to become a profitable stock trader. “Investing is not about getting rich quick. Investing is about getting rich slowly,” says Randy Frederick, vice president of trading and derivatives at Charles Schwab. These are wise words to live by if you’re new to the stock market and wondering if trading is right for you.

How to learn stock trading

Stock trading is a tricky business. Yes, trading individual stocks can be exciting and profitable, but it’s not easy. Here are a few things to keep in mind:

Successful trading takes time and commitment. If you’re just starting out in trading stocks, it’s best to avoid day trading and consider longer-term strategies. “Day trading is actually the worst option for beginner investors,” says Frederick. In reality, for every person who makes millions off of a lucky trade, there’s thousands of others who lost money trying the same tactic.

How to start trading stocks

Now that you’re armed with the stock-trading basics, it’s time to get into the real deal. Just make sure you take your time to learn the ropes. “Dip your toe in,” Frederick says. “Don’t dive in.”

1. Open a trading account

You will need a broker to make trades, so you’ll want to find one that you like and trust. There are several brokers to choose from, each with their own specialties.

As you decide on a broker, choose one with the tools, features, and interface that best complement your trading style and know-how. Other things to consider are fee structures, on-the-go accessibility, stock analysis tools, and educational resources. In the end, beginner traders will want a firm that has a wide offering and that will be there when times get tough.

2. Set your budget

Set a trading budget for yourself and stick to it. Frederick suggests that if you’re drawn toward shiny new investments or companies, allocate up to 1% or 2% of your investment budget toward those assets. You can start trading with just about any amount, but don’t touch money you might need in the short-term, like for mortgage payments or emergencies.

3. Learn the basic types of stock analysis

Generally, trading relies on “technical analysis,” or making decisions based on stock price and historical market data, rather than “fundamental analysis,” which involves evaluating a company and determining its true worth.

The goal of technical analysis is to analyze price movements of a security in an attempt to forecast future price movements. While a technical analyst may look at statistical trends and patterns with charts, a fundamental analyst will start with a company’s financial statements.

4. Practice with a stock market simulator

As you begin improving your analytical skills, you can easily put them to practice. Give stock trading a try without putting real money on the line with virtual trading, or paper trading. Virtual trading allows you to test your trading skills in a low-stakes environment.

5. Plan your first trade

Once you fund your brokerage account and you’re ready to place your first trade, it’s time to drum up a plan, which will help you maintain discipline and consistency as a trader.

A good trading plan typically outlines entry (buy) and exit (sell) points, informed by your skill level, risk level, and your overall goals. Keep in mind that every position you hold will most likely come with its own technical parameters — so keep in mind the time and effort you’ll need to give each stock the attention it deserves.