If you regularly watch the stock market numbers roll along the bottom of your TV screen or pass over them as you read your newspaper, and wonder what it is all about, then this article will be of interest to you.
If you have had a small dabble in the stock market in the past but felt isolated because you had to go through a broker who was aloof and spoke a strange dialog you could not always follow, then read on.
The Internet has brought about some amazing changes to how we access information and go about our daily business, and that includes trading on the the stock market.
There are now literally millions of new investors who keenly watch those numbers on their screens each night because they have more than just a passing interest – in many cases their livelihood is reflected in those figures. Many have made their fortune trading stocks, and doing it themselves, online.
It was not so long ago that only a select few knew how to trade stocks online, and had the resources to do it. But now anybody with a home computer and an Internet connection can join in, at any time that is convenient to them, and from anywhere it the world. Talk about the potential for total financial freedom!
The basic components of financial trading are:
- Stocks, which represents the capital raised by a company when they sell shares (also known as equities)
- Stock market (or stock exchange), where these shares are bought and sold on an ongoing basis, with prices fluctuating in response to all manner of influences and conditions.
All the major economic powers in the world have stock exchanges, and in the United States the two best known are the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ).
To help give an overall picture of how a market is performing at a particular time, the various stock markets use an indicator which is unique to that market and represents a weighted collection of significant stocks on the exchange. For example, the NYSE uses the Dow Jones Industrial Average, known as the Dow.
So when you hear a financial news summary which says the Dow is up (or down), you are getting a feel for how the market is performing at that time. Of course individual shares may not move totally in step with the Dow which is why investors take note of both the Dow and their own share prices.
There are basically two main ways you can begin online stock trading – either do it through a broker ( and be prepared for fees and commissions) or do it yourself with an online trading account with a minimal charge.
As mentioned above, the advent of the Internet has made it possible for almost anyone to start trading and these are the basic steps of how to trade stocks online:
Step 1. Open an online share trading account.
There are many online trading brokers which offer share trading accounts, usually with minimal fees and commissions. It is advisable to check out some and compare their offerings – some have introductory deals with free trades.
These are a few of the larger firms and are endorsed by the NASDAQ:
- TD Ameritrade
Step 2. Do your research.
This step is arguably the most important.
To enter into a trading position without having first properly researching the market and individual equities is akin to gambling, and people who are successful at online stock trading do not gamble – they treat trading as a business and research it thoroughly.
For this purpose, we recommend a great research tool, TradeMiner.
TradeMiner is specialized stock trading software which has been used by professional traders for over ten years and is now available in a PC version. It accesses extensive historical trading data to analyze and identify market swings and trends. Check out TradeMiner here.
Step 3. Start with small investments.
Whilst you are going through your familiarization and research phase, it would be prudent to invest in small amounts.
Of course, as you gain knowledge and confidence, you can move to more significant trades but the basics of online stock trading remain the same.
To your online trading success.