How to Trade Stocks and Make Money

Few things can improve your mood like making money. It’s especially fun to make money when your funds are out working instead of you. Buying stock to make money isn’t easy; some people spend their entire lives working full-time as stock pickers. If you plan to either join the ranks of full-time investors or would like to see your money working harder, there are a few basic steps you’ll need to follow to get started.

Step 1

Focus on your goals. A large part of making money in the market is avoiding situations where you could lose money. One such action -- withdrawing funds when the market is down -- can severely impact your pocketbook. To prevent this, write down a list of goals and work from that list. As your goals get closer, begin withdrawing funds from your stocks to preserve profits. Because the stock market is a volatile place, waiting until the last minute to withdraw funds is a dangerous path.

Step 2

Open a trading account to place trades. If you prefer having a professional help you research and pick stocks to make money, ask friends for references of good brokers and financial advisors. After interviewing advisors to find a match, check for any complaints and the broker's employment history at the Financial Industry Regulatory Authority BrokerCheck website (see References) If you would rather work alone, use discount online brokers to save money on trading costs.

Step 3

Create a list of companies to meet your goals. Wealthy investor Warren Buffett focused on companies that he understood, and stock-market guru Peter Lynch advocated “buying what you know.” By starting with companies that you understand, you’re more likely to recognize when to purchase and sell investments. Look around for products and services you admire and list them to begin your due-diligence process.

Step 4

Research your list of companies to decide which are investment-worthy. Use popular financial sites such as Yahoo! Finance or MSN Money Stock Research to review company revenues and profits. Dig through each company’s website to read their annual report and get a feel for their products and services. Use the same popular financial sites to review management and insider trading activities. Although some investors think this information is illegal, tracking insider trades is completely legal and helps prevent illegal trades by management.

Step 5

Place trades. If you want to buy the stock immediately, use a market order. This type of order sets the trade execution wheels spinning the second you press the “buy” button at home or your broker purchases on your behalf. If you’re worried that the market might be too high, look into limit orders. A limit order allows you to place a target below the current price of the stock. If the stock price plummets to your target amount, a trade order is automatically triggered, purchasing your stock.

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