Here is your little step-by-step guide to trading the stock market for beginners:
1. The investment tools you'll need: an easy-to-use calculator, a spreadsheet, a good computer with sufficient processing speed and a good-sized monitor, a color printer, a broadband Internet connection with protection security, access to a stock screener and an open account with an online brokerage.
2. Open an account with an online trading broker. Look at the commission fees and other service fees. There are several websites that offer side by side comparisons of online brokerage firms. Use the account to access stock information, resources, and educational programs that you can use when you start the stock trading process.
3. Look for different investment strategies and choose one or two. Websites and books are great resources for finding stock trading strategies. Search Amazon for stock trading books and use the reviewer's comments to choose a book to buy or view in your local library.
4. Write your trading plan. This will be your stock trading guide detailing when you will get in and out of a stock, how much to trade on the same stock, risk management, when to sell and set your goals.
5. Find good business candidates. Have access to a good stock scanner for technicians. Your broker should have the tool you need.
6. Practice buying and selling stocks. Before trading, one smart and practical thing to do is “trade paper” when you start to learn and evaluate strategies. This is basically where you keep a fake portfolio of your trades until you have confidence in your strategies. Your broker should offer monitoring portfolio services and you can also find it for free on Yahoo Finance.
7. Know the direction of the stock market trend. Before trading, learn to determine the direction of general markets. You will want to buy in a rising market to support your trades. A strongly declining market will work against any long transaction as in 2008.
8. How much capital to negotiate. Before buying stocks, decide how much of your capital you will trade in a single stock.
9. Incubation. Right after buying a stock, it goes into an "incubation period". There is really nothing you can do, but give space to grow. Like when you plant a seed and wait for it to grow. If it does not grow, you need to plant a new seed.
10. Know when to sell or when to buy more. The success of online equity trading for beginners hinges largely on knowing when to leave a position to protect your initial capital and gains. Examples include a stop loss based on a percentage, a dollar amount or the volatility of the stock price. To buy more than one position, this can be based on a percentage gain combined with the price force.
11. Track and document your transactions. Successful online stock trading includes continuous improvement of your strategies and your system. After closing a transaction, print the graph for review. Looking back will give you a good picture of all the areas for improvement. It also gives you a chance to see if you are achieving your stock trading goals.
12. Take the time to continue learning. Knowledge of stock trading is power and continuing to develop your experience and knowledge will increase your ability to be successful in the stock market.
It is the simplified guide to online stock trading for beginners.