How to Get Into Stock Trading
Many people who have never traded stocks before assume that only rich people can get into stock trading. This is a common misconception because anybody can trade stocks, although I will admit, it takes a considerable amount of money for an average person to profit from the stock market. If you're interested in trading stocks, there's a few basic things you'll need to know and do before you get started. I'll explain how to get started, but I'm assuming you already understand the basics on how the actual stock market works. If not, you'll want to research a little and read tutorials specifically for that first.
Choose a Broker and Deposit Your Money
If you want to get into stock trading, the first thing you'll need to do is deposit some money with a broker. There are different types of brokers, and some cost more than others. Now there's 2 main types of brokers you need to know about. There's online brokers, and there's personal brokers.
A personal broker is somebody who works for a brokerage firm and who will buy and sell stocks for you, and sometimes give you advice on what they think you should invest in. It's usually older people who still choose to go through personal stock brokers, because younger people are more computer savvy and many are not as trusting as older people can be, so they would rather make their own decisions when it comes to purchasing stocks. When you hear the phrase "stock broker", this is usually referring to a personal broker, since they have been around a lot longer than online brokers. Many people think they need to go through a personal broker to trade stocks. Fact is, you can trade stocks on your own through an online broker.
An online broker is not an actual person, but more of like a website where you can buy and sell stocks online. Anybody can trade stocks on their own through an online broker. Examples of online brokers would be Scottrade and Etrade. If a person, for example, wanted to trade stocks through Scottrade, they would need to sign up online, and then go down to their local Scottrade branch to deposit money. The way you deposit money into a stock account, is similar to how you would deposit funds into a bank account. Your stock account is very similar to a bank account, and you can withdraw funds in the same manner. To deposit funds, there can be various methods that the brokerage firm will accept, but depositing a check is usually the most commonly accepted method.
Once you go down to your local branch and deposit funds, they should appear in your account online on either the same day you deposited them, or the following business day. Sometimes it can take a few days, depending on what form you used (check, wire transfer etc.). As soon as your deposited money appears in your account, you're ready to start trading.
How Much Money Does It Cost to Trade Stocks?
It's fairly cheap, but it depends on what type of broker you go through and what particular brokerage firm. I've always gone through Scottrade, and as an example, they charge $7 per trade. What this means is that whenever you buy a stock, it costs $7, and whenever you sell a stock, it will also cost $7. So let's say Yahoo's stock price is $5 per share, and you want to buy 100 shares. This will cost $507, because 100 shares multiplied by $5 per share is $500, and you're paying $7 to buy them. Now whenever you're ready to sell those shares, it will cost you another $7 to sell. If you're going through a personal broker, it will probably cost much more since you are basically paying them to be the middle man and do all the trades for you.
How Much Money Do You Need to Make Money With Stocks?
Well that depends on a person's skill level, but for a beginner to make any kind of profits, I think at least $1,000 would be necessary, though you can usually start with any amount if you just want to practice. However, some brokers require you to deposit a certain amount in order to trade with them. This amount is usually around $500.
Do I Need to Use All My Money To Buy a Stock?
No, you can use as much or as little of your money as you want. If you only want to buy $100 worth of a stock, then you only have to spend $100 (more or less, depending on the brokers trading fees).
How Do I Buy and Sell Stocks?
It's very easy to buy and sell stocks. If you're going through a personal broker, you just call them up and tell them what you want to buy or sell. If you're going through an online broker, you just login to your account online through their website. Once you're online, there should be a section on their website that allows you to buy and sell. There will usually be a button with either option that you click. If you want to buy, choose the buy button. If you want to sell, choose the sell button. Under that, there will probably be an area where it will allow you to enter the number of shares. This is where you type in how many shares in a company you want to buy. If you want to buy 100 shares of Yahoo, then enter 100 in there. There will also be a box that allows you to enter a price, along with the option to choose market price or limit order. Market price is whatever the current price of the stock is at. It's best to never buy stock at the market price, and to always enter your own price instead using a limit order. This ensures that you get the stock at the price you want. Stock prices are always fluctuating, so the the market price can change at any time, and you wouldn't want to get stuck paying more for each share than you expected to pay. So let's say Yahoo's stock is at $5.00, and that's the price you're willing to buy it at. You should enter $5.00 in the box where it allows for the price to be entered, choose limit order, and hopefully you'll get it at that price. If the price per share rises to $5.50 before you get to submit your entry, then it won't purchase the stock for you until somebody is willing to sell theirs at $5.00. When you're ready to buy your stock, just make sure all the fields are entered correctly and submit your choices. If your order goes through successfully, the shares should appear in your account online.
When you're ready to sell your shares, you would do it in the same manner that you bought them. When selling, it's also wise to use a limit order, and enter the amount you want to sell your stock at. This way, it doesn't sell for a much lower price than you're asking for.
So as you can see now, anybody can buy and sell stocks as long as they have a bank account and have access to the internet or a phone. Of course, this is just a guide on how to actually buy and sell stocks. If you're a beginner, you should still do lots of research before jumping into the stock market, as there's still a whole world of trading lingo and other things you'll need to know to be successful and profit from the markets.
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