How To Get Started Trading Stocks

The first thing you will need to do, if you want to know how to get started trading stocks, is to deposit money in a brokerage account. You can choose to have a broker find stocks for you to invest in, or you can do it yourself.

A much better way to trade is to open an account with a discount broker. They typically charge $10 or less to make a trade, but you have to find your own stocks to trade. Here is my online broker review of the three most popular discount brokers. I suggest you set up an account with one of them or a similar type of broker.

What you want to put your money in is whatever vehicle will outperform the markets. So it’s all about RETURNS! Big returns mean big risk. No risk, very little if any return. So you need to decide how much risk you are willing to accept for the return received. What makes you comfortable to sleep at night?

The next question you must ask yourself is, “what is my goal?”. Are you trading/investing for growth or for income? These will require different trading strategies. If you are investing for growth, you can take on more risk and shoot for higher returns. If you are investing for income, you need a more safer and consistent income.

The next thing you will need to learn is to how to tell if the markets are going up or going down. The direction of the markets will determine what you should be investing in. If you know the markets will rally you can go long. Your are betting stocks will go up. If you know the markets are about to crash, going to cash or buying Contra-ETF’s is a smart move.

I don’t have time to go into the pros and cons of all investment vehicles, so I will stick with the topic of stocks, mutual funds, and ETF’s. These can easily be bought and sold through any discount broker. Other investment vehicles are for more advanced traders and you should only try them once you have an understanding of the basics.

Remember what I said before, when it comes to growth, focus on returns. So how do you tell if a Mutual Fund, ETF, or stock is a good investment for growth? In the simplest terms, you simply compare its returns to that of a benchmark. The benchmark I use is the S&P 500. This index represents 500 stocks and gives a more reliable outlook on the broader market. If your investment vehicle is beating the benchmark, its worth consideration.

Mutual Funds are probably the best way for a beginner to invest while he/she educates themselves on stock picking.

Go to a “Mutual Fund Screener” (usually your discount broker provides this with your account or you can Google one online) and check out the 1-year, 3-year and 5-year return of the Mutual Funds. Compare that against those of the S&P 500. Did any of those beat the markets in all three-time periods? If so, that would be a good place to invest your funds for now.

If you want to “earn while you learn”, I’ve compiled a few FREE trading strategies that you can use right now. I’ve personally used these with success in the past. Simply follow the directions. Most of these only work in a BULL market.