The Beginner’s Guide to Online Stock Trading

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Everyone recognizes the term “Wall Street” although it conjures up different meanings and feelings to different individuals. To some, it is a capitalist icon that represents financial markets and wealth. Others think of evil bankers preying on the “have nots” or less wealthy consumers to enrich themselves. Of course, Wall Street is but one trading exchange in the global financial machine and no one is truly eliminated from taking part in buying and selling financial assets such as stocks, bonds, commodities and other tangible products. This applies whether participation is significant or very small.

In the past buying and selling stocks was conducted through contacting a broker who executed the order as quickly as possible. Due to the requirement to carry out such orders through phone calls or other communications with regional brokers or third market maker representatives who in turn contact floor brokers or request the trade, timing of trades could vary greatly, and delays were frequent.

But today’s electronic communication networks (ECNs) and internet brokers have brought about significant advantages to online investors. Through the utilization of ECNs and efficiencies provided by these online brokers, traders can rely on a much more timely execution of their requested trade, in some cases occurring nearly in real time. With the volatility of some stocks or other markets, it becomes critical to traders to be able to execute trades at precisely the optimum time to take advantage of news events or other activity that may impact gains or losses.

Online trading is simply the practice of monitoring market activity or trends that provide opportunity to gain (or avoid loss) through executing trades. Often times such actions include buy and sell orders that occur on the same day commonly referred to as “day trading”. Day traders typically are very in tune with market activities and strive to take financial advantage quickly. Online trading is a key element in successful day trading to allow for the most reliable and immediate execution of trades.

How Do Online Traders Operate?

Online trading requires some key elements to be successful:

Knowledge – there are numerous methods for becoming aware of opportunities for stock trades. These include interactive internet sites that provide stock pricing and information in gains and losses throughout the trading day, broker recommendations, and your friend’s “hot tip that can’t miss”. Unless that friend has a proven track record of good advice, I would pass on that source. Brokers, news events, and company press releases can provide a solid picture of what may be meaningful to your trades. Some excellent news sources include:

Motley Fool – well known for business news, market trends and investment advice

Wall Street Journal – probably one of the most respected sources of financial news, global political events that may impact markets worldwide, and links to other financial tools, as well

Forbes – an excellent source of reliable news information and stock trends

Investor Guide – This site not only includes recent news and a list of what they term “hot stocks” but also includes investor tools that help you hone your investing strategy (more on that in a minute)

Additional information – check out these sites for more general information related to online trading

Top Ten Reviews – reviewers of a multitude of subjects including online trading

Planting Money Seeds – this one not only includes investment advice, but also provides information on how to research potential investments

Terminology – If you’re going to make sense of what you learn from the knowledge gained from any of these sites you need to understand the terminology. P/E ratios, spreads, etc.

Investopedia  – provides an excellent coverage of terms that an online trader should understand. While you may not be an expert on each subject day one this can at least get you started

First Trade – this is pretty in-depth glossary of investment terms, but if you’re looking for a particular term you’re likely to find information on it here

Tools – your computer or mobile phone provide the basics for access to online stock trading and investment research. Another component you should consider is online trading software that provides analytical tools to help you chart stock performance over periods of time. This can be invaluable in selecting your investments.

Strategy – this is a topic that every investor needs to determine for themselves. It includes how much capital you have available for your initial foray into online trading and how much of it you feel you can afford to lose. Remember that there is no such entity as a “sure thing” in financial markets. Many investors are in the stock markets for the long haul and as such can tolerate fluctuations in value. Day trading is the opposite strategy where an asset is purchased typically with the intention of turning it around at a profit, often within hours or even minutes.

Consider each of these topics when determining your personal investment strategy:

  • Capital available to invest (this will of course determine how large your initial investments can be)
  • Risk tolerance – how much can you afford to lose – if you suffer temporary losses, how quickly will those losses impact your financial stability
  • Reliable advice – find an online broker you feel comfortable with and can trust to handle your transactions. Remember your desire will be to have quick response, and flexibility with how you can conduct your business with the broker. Also important is what the fee structure is for your trading levels.
  • Discipline – avoid impulse trades, whether long-term or day trades. All traders will be able to tell you stories of trades that were winners and plenty that went awry. Stick to your investment strategy and research methods to drive your decisions – not emotions.

Is Online Stock Trading for You?

Through effective research of companies you plan to invest in (due diligence), an understanding of financial markets and products combined with effective trade strategy and a reliable broker you will find there is indeed money to be made in online stock trading. Start slowly and increase your investments as you gain understanding and experience.

Important consideration:

Evaluate online brokers thoroughly and pick one with positive references. You want to be able to trust the service and pricing of your online broker who will execute your trades promptly and consistently. Brokers can vary greatly in their fee schedules and services provided.

SureTrader is a leading online broker for day trading that can provide you with many attractive options for your trading, including a mobile option for traders on the go.    

Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

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