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Stock Trading: How To Trade Stock, How To Survive Stock Trading

20 Min Read
Last Updated March 26th 2021

Are you looking to trade stock but not sure where to begin? Then look no further, as we have it all covered for you with a simple and easy guide to trading stock and a step by step guide in how to survive stock trading. 

Stock trading has drawn in millions of individuals around the world as they wish to be a part of such a fast-paced, dominating, dynamic, challenging but yet significantly rewarding pathway, a pathway in which can create endless amounts of possibilities. 

However, even though getting into trading stocks can actually be easier than you may believe, the process of understanding how to stock trade and survive stock trading is a lot more in-depth than you may think. 

Granted, you may believe that most investors know how to trade as they go into the financial market or at least have some understanding, but the reality is, some investors actually don't know how to trade stock and solidly rely on a few factors, factors which include luck (of what the market does to their stocks), hot tips passed on to them or if they are really unsure this is when they may start to seek advice if they don't actually understand what is happening as the figures start to adjust. 

This is why taking the time to learn and research as much information regarding stocks and how to trade stock is a wise route to start with. 

Stock trading for beginners is a brilliant starting point, as within this article it will help you to learn and dig deeper as a beginner into stocks and how the trading stock trading operates, which additionally will get you ready to start your journey 

To be a part of stock trading, you have to put in hard work, time and some of your own charm in order to have a good chance at becoming a financial success. However, a reminder for you to be aware of, is that control is out of your hands sometimes when investing as anything could take a surprising turn that wasn’t expected, with positive and negative effects.  

To trade stocks, you don't need to be thrown into the busy market fields within the New York Stock exchange or the London Stock Exchange, you can start your journey within the comfort of your living room with all the help and guidance you require offered to you via online trading platforms where you can speak with a broker as well as helping personal, too having all the educational material you will require before starting your journey, to which we have it all covered for you and more. 

Ready to learn how to trade stocks and survive stock trading? Let’s jump straight in. 

 

What Is Stock Trading?

Before we jump straight to learning how to stock trade, firstly it's best to have a good understanding of what stock trading is. 

Stock trading 

Stock trading, in simpler terms, is buying and selling of shares of a company, which to simplify even further you are buying a piece of that company. 

When it comes to stock trading you will see there are two types of individuals, Traders and Investors. 

What are the differences between Traders and Investors? 

Stock Traders are professionals that are investing within the financial market for themselves, on behalf of a company or individuals. But an important factor to understand which sets the two types of individuals apart is the traders’ primary goal. Traders aim is to purchase and sell shares in various companies to make as much profit as physically possible from short-term gains, whilst taking advantage of the variations in prices. 

Investors, on the other hand, are generally in it for the long term. They aim to seek larger returns in profit over a longer period of time with a common strategy in place known as ‘buying and holding’. 

Types of Stock Trading 

stock trading

Now, the next step is learning about the various types of stock trading that happen. 

ActiveTrading 

Active trading commonly is tied with traders, as like its states within the name active traders like to move quickly and within a shorter time frame to seek profits from taking advantage of price movements. 

Active traders, because of their aim is to make a big profit within a quicker turnaround, they tend to be clever and use their knowledge wisely with which fields of investing they go into, for example, stocks that are volatile (can change within any moment) or foreign currency, as within these two categories anything can change within a short period of time and it's a much quicker turnaround, so to speak than other categories.  

Day Trading 

One of the most popular and well-known trading- styles is Day Trading. Day Trading is the buying and selling of securities within the same day. 

This style of trading I am sure you may or if not will be slightly familiar with, as seen in various movies. A day traders aim is to seek every inch of profit that can be achieved before the day is out by buying, selling and closing their positions as stated within the same day, and traders are not able to hold any positions to move forward with, it all has to be carried out within the singles session.

Position Trading 

Position trading is a trade which you will more likely see investors undertake, although traders do use this strategy as even through its deemed to be more for long term, the long term definition could be starting from weeks which a trader could potentially hold on for, however months or further which is more than likely aimed and carried out by investors, as they use this strategy more frequently.  

As you may have guessed, position trading is more of the opposite to day trading, as the traders are more concerned about the long term performance of an investment rather than the short-term. 

Swing Trading 

Swing trading is a trading style that is held for longer than one day, typically for a week or potentially longer by traders, as this is the right amount of time to generally see a price movement. 

The trader will look to see where a price is more than likely going to go next, they will then become a part of that asset and then look to make a financial profit if a move is to happen. 

Swing trading is typically described as a middle trading strategy and sits in between Day trading and Trend trading. 

To summarize, swing traders will sit on their stock for a couple or three days leading to potentially weeks until the time is right with the price, which is why swing trading is the middle continuum between day trading and trend trading.

 Ready to dive into the Stock market?

How to trade stocks 

So now you understand the differences between trading trends, now is the time to give you the simple steps in how to start trading stocks. 

As a beginner in trading stocks, you are best to keep things as simple as possible whilst you find your feet.

To make your journey simple from the start, all you have to do is simply make sure you are one step ahead, carry out extensive research to educate yourself in all areas of the financial markets as well as the most second vital part of the learning process, practise, practise, practice, as the saying goes practise makes perfect, and the benefits from practising will allow you to gain a further and a deeper understanding of the stock trading market, and will also enable you to test theories whilst not committing your own funds straight away and lastly, you may be able to find or see which trading strategery you are more than likely going in the direction of.  

Read Also: What Stocks To Buy In 2021?

 

How to trade Stocks: Step by Step Guide 

Step 1. - Open a brokerage account 

The first step in the process is to open up a brokerage account. It is advised and it is best to keep your professional investing transactions separate from your personal accounts, so the best way to do this is to find an online broker who will help you get set up and they will also be on hand when you are ready to trade.

There's no need to panic, you don't need to invest straight away you can open your account and carry on practising until your heart's content if you wish, but with the ease of knowing that everything is all set up ready for when you are. 

Opening an account with a broker can take minutes, eToro, a leading online brokerage firm has everything on hand for you when starting your journey or if you are an investor looking for a leading online trading platform, eToro is one of the top trading platforms to be a part of. 

Step 2. - Research, learn and read, read, read

On the start of your journey into stock trading, this next step comes as no surprise, the more research you will carry out, the faster and more likely you are to achieve success. 

Learning the tricks of the trade of the stock market is your biggest goal when you want to be apart of such industry, and not just focusing solely on learning on stock trading but the market as a whole, as what you will find is you might end up going down a route that you wasn't intentionally aiming to go down at the start, so learning too much isn't a bad thing, right? 

There are mass amounts of trading education information at your fingertips, which we can provide and have it covered for your learning journey and the must-read article as mentioned above, is a perfect go-to start you off. 

Also, there are fantastic reads with samples of advice written within The Wall Street Journal, where you can subscribe online or access various financial news sites including Yahoo! Finance and Google Finance to keep up to date with the latest financial news to help engage your learnings with the current reality. 

On the subject of learning, understanding and studying the technical analysis side of investing is also a good point to mention. 

Not to panic, you don't need to be an expert but it is good if you know and understand what is happening and what the basics are when you look at a price chart or multiple charts. But like for most of us, your full understanding will come with time and practise.  

Keep learning, watching and studying what is happening within the market when you can and within your spare time as this is not only going to benefit you hugely it's also making your process quicker to becoming a part of the stocks trading environment and being successful in doing so. 

Step 3. - Set your personal stock trading budget 

Once you have your firm understands how the financial market works and in particular stock trading, it is worth you now sitting down and creating a stock budget for yourself before you start your journey so you have a plan in action

Investing, without stating the obvious is only worth participating in if you can afford to do so. Having or setting a budget of how much you wish to invest is the first starting point and ideally, these funds are available funds and funds that are not vital expenses that need to be covered, as remember with investing you are not guaranteed anything. 

Once you have a good understanding of how trading in stocks works, you may even include in your budget which asset or assets you are looking to buy and you may wish to put a rough figure beside each stock you are wishing to enter in. 

After all, setting a budget is also about being organised. 

Step 4. - Time to practise 

Now your journey is starting to feel real, It's time to enter the world of practising stock trading. 

There are various online trading platforms for you to practise your understanding of stock trading, and with the added relief of using virtual money rather than your own money whilst you learn the ropes. 

Online virtual trading platforms or paper trading which is another terminology, enables individuals to see, feel and experience how trading operates and shows how diverse and quick the market can change within a period of time, which is an ideal way to get involved without the risk of losing your own money. 

Practising online will also enable you to find your preferred style that suits you which you can take with you when entering the real world of stock trading. 

Step 5.- Always try to keep a clear, cool perspective 

Investing for some can become frustrating if they haven’t hit the big time or what they are looking to achieve, and this is natural. But the best way to go through your journey is to always keep a cool, calm, collected but strong perspective on your goal that you are wishing to archive. 

You maybe constantly looking for the next big stock that is going to surpass all expectations, and you wouldn't be the only investor wishing for this, but you have to be patient and keep up to date with all the financial updates as well as your own research and watching the stock market to be on top of the game, which is why keeping a cool perspective is important and not become to hothead, as rushing in will potentially see you make the wrong move and a be costly. 

 

How to survive stock trading 

Once you're ready to enter the world of stock trading, there are always tips to help you survive and give only the best experiences when stock trading. Here is a breakdown of the top 5 helpful takeaway tips to always carry with you. 

5 tips for how to trade stocks can help you survive stock trading:

1. Pick the right broker for you

Picking the right broker intelligently is the wisest move you can make when starting your journey into stock trading, as there are thousands or more brokers around the world that unfortunately, some may not have your best interest at heart, which is why this key point comes first on the top tips to takeaway.

eToro 

The global leader of social trading, eToro is an online trading platform that will enable you to not only have access to find a broker suitable for your interests within your stock trading journey but it can also take minutes to undertake, but that is not the only benefit, the online trading platform also gives you access to all the top stocks that you may wish to invest in with ease, making it one of the platforms on the rise for traders and investors around the globe to create a safe, easy, accessible worldwide stock trading journey.

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2. Avoid potential failures - ‘hot tips’ 

From individuals on forum sites to advertising ads on websites who are advertising the next ‘sure-thing’ stock, it's wise to not think too much in-depth into the information they are expressing and advertising, as more commonly most of these advertisements are displayed from the ‘pump-and-dump’ companies that are seeking you to jump on board with the stocks they are advertising under false or misleading recommendations, in the bigger picture, they are only looking out for number one and sadly it is them. 

So please be careful when being advised and either stick with your own learnings, trusted personal and brokers advice if needed and given. 

3. Take your time

There is no need to go full steam ahead, it's not a race and it's your money you are investing in whether it be for the short term of the long term, there is no need to rush in and get any position just because you're either worried that you may miss out or maybe your nerves might be creeping in slightly. 

The best advice is to take a seat, breathe, relax and then choose wisely as the last thing you want to do is make any rational choices that potentially, as advised, may end up being costly for you. 

4. Don't just focus on the money 

This key point may seem slightly backwards, but it is very important and makes clever investing. For example, if you rush into a buy just on the forefront of having money solely and firmly set in your mind, 9 times out of 10 you may be setting yourself up to fail by carrying out thoughtless moves. The best way forward is to focus on your strategy and keep on learning, as your strategy and your learnings are the two most vital assets that will make you make money. 

5. Learn from your mistakes 

Just like in life, we all make mistakes and the most important part is we learn from them and within trading, this is no different. 

Making mistakes and taking responsibility for your own actions is one takeaway to always carry with you, as it will help you learn in a hard and constructive way to help prevent or avoid making such errors in the future. 

Even if you feel that the outcome was out of your hands, look into it deeper to see if there were any warning signs of this outcome set in play which maybe were overlooked, as this will be one of the best learning curves to take forward with you throughout your trading journey. 

 

Key takeaway points 

If you remember anything from Stock Trading: How to trade, How to Survive, make it these key points.

  • Choose the right broker for you wisely 
  • Research and study as often and as much as you can so you understand the financial market, it will make it smoother for you
  • Don't rush into the deep end, take your time to understand what you are going into when buying stocks 
  • Avoid fraudulent advice or commonly known as ‘hot tips’ 
  • Learn from your choices that may not have worked out and see if there was a lesson to be learnt
  • And lastly, always invest within your financial means, investing money you are able to use without having a financial impact on your personal life. 

FAQs 

How old do you have to be to invest in stocks? 

The legal age to invest in stocks within the UK is 18 years of age. The legal age within the USA is 18 however, in most states it requires a legal age of 21. 

Can I start trading at any point of the day? 

The short answer to this question is yes, however within the open trading hours. The New York Stock Exchange (NYSE) typical trading hours are 9:30 am until 4:00 pm this also includes Nasdaq Stock Market and other U.S stock markets. 

Within the UK the London Stock Exchange (LSE) regular trading hours are Monday through to Friday 8 am to 4:30 pm ET. 

Can I trade stocks commission free? 

Yes, you can, as long as you choose your broker wisely.eToro is not only an online platform with access to it all, it also offers 0% commission when it comes to buying your favourite stock, which means that there are no additional fees to be charged you simply open an account, make your first deposit f a minimum $200 and then you can pick you top stocks from the world’s top exchanges and then your all set. 

Is there a preferred stock trading strategy for beginner stock traders? 

The straight answer to this question is no. Each strategy relies solely on you as an individual and how and which strategies or strategy works best for you when you start trading. 

A good way to learn your preferred strategy is by practising training via a virtual online platform. Here you will find your style of trading along with understanding the way the stock trading market operates. 

How many stocks should I buy?

There's no right answer to this question, however, it is advised as a beginner to start with a smaller portfolio. 

When you're looking to buy multiple stocks, it is advised to have a diversified portfolio by purchasing multiple stocks within various industries. This is for various reasons, the first one being not to just tie all your eggs in one basket within just one stock as this poses a bigger risk as opposed to investing in multiple stocks and secondly it's advised not to invest in more than 8-10 stocks as a beginner investor. 

Will I be taxed on my stocks?

Within the UK, every individual receives a tax-free personal allowance which has been increased to £12,500 for the tax year 2020/21. Which basically means that any money made from your investments for both stocks and shares are included within this allowance, but also included with this allowance will be any additional forms of income such as employee salaries, property incomes and any other form of additional income. 

Above the personal allowance of £12,500 every person will be taxed at 20%, which is the basic rate for income tax within the UK. If your annual salary exceeds £50,000you will be subject to 40% income tax and subject to 45% income tax if you earn and exceed £150,001 per year. 

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