How to Begin Trading Stocks

Buying stocks shouldn’t be a white-knuckle, exasperating experience. Some investors dread purchasing shares because they see the stock market as a roller-coaster experience designed to create sleepless nights and tormented days. Fortunately, this doesn’t have to be the case. By doing some homework before you make purchases, you can find and trade stocks that meet your investment objectives and help secure long-term goals that aren’t achievable with bank account investing.

Step 1

Write out your goals, the amount of money each one requires, and the time frame. This will help you purchase stocks best for your goals. Large U.S. companies work well for goals over five years, while small company and international stocks should be purchased with a longer investment horizon. By writing out your goals, it’ll be easy to eliminate the thousands of investments that don’t meet your investment criteria.

Step 2

List some companies you admire. Look around for products and services you use. Visit the company’s website and click on the investor resource pages to find out if they’re public and available for purchase. Although you won’t buy every stock on your watch list, financial guru Peter Lynch recommends investors buy companies they know so that they’ll better understand how the company operates and what will make it continue to be successful.

Step 3

Research your watchlist of stocks. To pare down the list, compare company revenues to see which have increasing sales and company profits to find those firms that increase earnings for investors each year. Review news about the company to find any recent management changes, product developments or recalls. Finally, look up the stock chart to see recent trading activity. Although none of these is individually a signal to buy or sell a stock, it’ll give you better insight into the operations of the firm so you can make an intelligent purchase decision.

Step 4

Open a brokerage account to begin trading. If you prefer to find, research and pick stocks alone, look toward discount brokerage firms online to save some money on trading costs. If the thought of pressing the “buy” button alone fills you with dread, focus on full-service brokerage firms with professionals to help you. Before deciding to hire a broker, check her track record on the Financial Industry Regulatory Authority BrokerCheck website.

Step 5

Decide what type of trades to make. If you wish to purchase quickly, choose a market order to buy shares in a stock immediately. When you’re worried that a stock price is volatile and you want to avoid overpaying, use a limit order. This order allows you to pick a price target. Once shares in the company plummet to your predetermined point, a market order will automatically trigger, purchasing your shares. Of course, if the stock price never drops, you won’t buy the stock if you choose a limit order.

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