Online Stock Trading Basics: Here’s How to Get Started

online stock trading

Beginning a future in online stock trading can often be an intimidating task. I remember back in the 90’s tech boom the first time I started trading stocks. I used to call in my orders to my stockbroker every single day.

Nowadays it’s totally different, all you have to do is access the internet, enroll in one of those online stock broker services and you’re good to go. Online stock trading really has now become a DIY investing.

You may also want to check out my previous post about this topic wherein I also wrote about online stock brokers you should consider if you are looking to venture into this exciting and sometimes nerve-racking field.

Here are a few tips for the beginner investor, including what to do, what not to do and a basic overview of stocks and funds.

Choose a good broker

There are hundreds of brokers available. Do your research online and see what you feel is best for your style. One important factor to consider is their fees especially if you plan on doing online stock trading many times per day or even once or twice a week.

Two good places to start are Ameritrade.com and Scottrade.com. These are both well-known companies that already have a good reputation and standing in the online stock trading world.  I personally have been using Scottrade for a while now and have not experienced a single issue with them.

Familiarize yourself with the terminology before investing

Knowledge of stock market terms to expect to be used so you are not caught off guard during an online stock trading transaction. This will help you avoid poor purchases or sales due to bad communication or not understanding what you are doing.

These terms are very important for you to know so I will also add some basic terms to this article below.

Keep it simple

Don’t complicate stock purchases by looking too deeply into the company or stock details, check the status of the stocks and invest accordingly.

Don’t invest too much time into just one stock. With time you will learn to identify “flags” that will help you make quick investment decisions in the future. For now, don’t complicate the process too much.

Research the company before buying their stocks

Under no circumstances will it ever be advisable to purchase stocks, bonds or any other investment products without thorough research into the background of each item of interest.

Decide when you want to cash in

If you are looking for a quick profit, with high risk, you will be focusing on one type of investment, if you want long-term profit, but low risk, you will be focusing on a different type of investment.

Stock Market Terms:

Bid Price

The highest price a buyer is willing to pay for a stock.

Asked Price

The stock price that the sellers are willing to take for it.

Spread

The difference between the bid and the asking price of a stock

Limit Order

An order to buy or sell stocks at a specified price, when the market reaches this specified price, the transaction takes place.

Market Order

An order to buy or sell the stocks immediately at the best current price

Commission

The amount of money earned by the broker or agent for buying or selling securities on behalf of their client.

Day Order

An order that is only valid for the day it is made, if the order has not yet been paid by the close of the business day it will be purged from the system.

Diversification

The reduced risk of loss through the purchase of multiple stocks, spreading your risk over several companies instead of just investing in one

Equities

The common or preferred stock which signifies a share of the ownership of the company.

Index

A statistical measurement of the state of the market usually will take the top stock’s average to achieve the indexes desired result.

Portfolio

List of stocks owned by an individual or company.

During the lifespan of your investments, it is crucial to keep track of the companies using the above mention tools, this will allow you to gauge when it is time to sell your stocks, purchase more or cash out on any interest earned.

Using these basic suggestions should get you started in the right direction. Further study in the market will greatly help you in increasing your profit potential in the stock market. Good luck!

BA in Accountancy, he entered the entrepreneurial world by starting his first online marketing business in 2004. Passionate about personal finance, the stock market and a digital marketing addict. I also love to read books on entrepreneurship and technology and always on the lookout for new opportunities. I'm an avid golfer and currently a 15 handicapper.

    Moneylogue articles delivered straight to your inbox

    Disclosure: This site uses affiliate links. At no extra cost to you, we sometimes receive a small compensation if you purchase through the links within our articles.