Learn Online Stock Trading 101: A Beginner’s Guide

If you already hold a stock, you might consider putting a trailing stop-loss sell order. This allows you to keep the stock as long as the price rises and automatically sell when the price falls below a predetermined threshold.

 

No one order type is inherently superior to another. You can always have the correct tool for your scenario if you learn as many of them as possible.

How Much Will Trading Stocks Cost?

Expenses are one impediment to successful stock trading. This is the fee you pay to own or trade securities. A commission charge, for example, is one form of expense. Therefore, when selecting a brokerage, search for one with reasonable costs.

You may incur no costs if you buy individual stocks through a brokerage that does not charge commissions. However, before you begin trading ETFs, mutual funds, and other investments, you must first grasp expense ratios.

These funds are managed by a person who is paid a proportion of the fund’s assets annually. So, if an ETF has an expense ratio of 0.1 percent, you will pay $0.10 in costs every year for every $100 invested.

 

It would help if you also examine your risk tolerance. For example, consider your investments losing 50% of their worth all of a sudden. Would you buy more after the crash, stay the course, or sell?

You have a high-risk tolerance if you would buy more. You have the financial means to take more risks. You have a low-risk tolerance if you would sell. It would help if you looked for pretty safe investments.

Recognizing how you would respond in the event of a loss is one thing; understanding how much you can afford to lose is quite another.

For example, you may have a high-risk tolerance but no emergency savings to fall back on if you lose your job unexpectedly. In that situation, you should not invest your limited cash in hazardous stocks.

How Does Stock Trading Affect Your Tax Bill?

It’s critical to understand the tax implications of your assets, especially if you plan to trade equities actively. This is because capital gains taxes are the taxes you pay on stock profits.

You often pay greater capital gains taxes when you hold a stock for less than a year before selling it. Conversely, when you own a stock for more than a year, you pay less.

This tax structure is intended to promote long-term investing.

Profitable stock sales will increase your tax bill. However, selling equities at a loss reduces your tax bill. Unfortunately, the “wash sell rule,” which delays the tax implications of any profits or losses if you re-enter the same position within 30 days, prevents you from taking advantage of this tax benefit. 3 In other words, if you sell a stock at a loss and then repurchase the same stock a week later, your loss will no longer be tax-deductible.

When you sell the shares again, the loss will be accounted for.

If lowering your tax bill is a top priority, consider a Roth IRA or 401(k) plan instead of a traditional brokerage account.

How to Invest in Your First Stock

When you’re ready to make your first trade, fund your brokerage account by moving funds from a bank account to it. Your cash may take some time to “settle” or become available. Some brokerages give you the money right away while the transfer is being processed, while others make you wait a specific number of days.

Log into your brokerage’s online account once the money has settled. Choose the stock you want to trade, then choose an order type and place the order. After placing the order, keep an eye on it to ensure that it is executed. If you use market orders, they should be executed instantly.

If you use limit orders, your order may not execute immediately. Move your limit price closer to the asking price (if you’re buying) or the bid price (if you’re selling) if you want the trade to happen faster.

Are You Prepared for Advanced Stock Trading Techniques?

Beginners should stick to straightforward purchase and sell transactions. However, once you’ve mastered the fundamentals, you’ll be able to add advanced tactics to your trading toolbox.