If you’re thinking about getting started in trading stocks, now might be a great time. The market is volatile, and trading is more accessible than ever. Trading stocks might seem intimidating, but in this guide, we’ll break it down into easy-to-follow steps.
- Is Trading Right for You?
- Education and Paper Trading
- Choose Your Brokerage
- Research Stocks and Start Trading
Step 1: Is Trading Right for You?
The first step in the trading journey is asking yourself if trading is right for you. Get down to the reason why you want to start trading.
Trading stocks comes with risks, so you need to make sure you are willing to take those risks and that you have extra money that you are able to use. Don’t risk money you cannot afford to lose. If you don’t think you’re willing to take on risk, then trading might not be right for you.
You don’t have to start out as a full-time trader. You can start out small to build your skills and work up to a larger account.
You’ll also want to consider trading psychology. Think about how you would handle a situation where a trade went bad. Would you let it drag you down or would it motivate you to continue trading and make that money back? Having the right personality and control over emotion is an important, but often overlooked, aspect of trading. You’re never going to win 100% of your trades, but you can’t let the losing ones bring you down if you want to be a successful trader.
Step 2: Education and Paper Trading
Before trading, you’ll need to do a lot of research and digging. Learn everything you can about the markets so you don’t make any mistakes that could hurt your account. There are a ton of free resources available, as well as premium paid courses. Your broker may offer educational courses and paper trading accounts, as well.
Paper trading is a great way to get started, because you’re not risking real money, and can get an idea of how you’re strategy will play out. However, since it isn’t real money, you may be more likely to take bigger risks than if you’re trading with real money. Paper trading is still a great way to test out your strategy or introduce new techniques you’re thinking about using.
Some of Benzinga’s education offerings include:
At this step, you’ll also want to narrow down what trading style and strategy you want to focus on. New traders often find the best success with choosing one strategy and sticking with it. This way, you can perfect it and get really good and consistent.
Trading styles include:
- Day Trading: Buying and selling a stock on the same day with no intention to hold overnight.
- Swing Trading: Trade lasts longer than one day and less than a few months.
- Scalping: A fast-paced style of day trading that aims to get out of trades very fast and make small profits adding up a larger amount of profit.
Within these trading styles, you can find a wide variety of strategies, including opening gaps, momentum, breakouts, and more.
Read More: Beginner’s Guide: How to Start Day Trading
Understanding the risk of trading will help you make more educated trading decisions. Risk can come in the form of a trade going bad (lose money instead of making money), low liquidity (can’t buy or sell a stock fast enough to get the ideal stock price), and even technical difficulties.
The general rule for risk is to never trade more than 1% of your account on a single trade, or no more than 3% of your account for your total trades. This helps to make sure you don’t blow up your entire account on one trade.
However, you must also consider how much you yourself are willing to risk. The bigger your account size, the more you might be willing to risk.
Read More: What to Know About Day Trading
Step 3: Choose Your Brokerage
A brokerage is a must when trading stocks. This is the platform that will help you execute your trades. There are a ton of options available to choose some, each with its own pros and cons. Your decision may be based on your trading style and strategy, as some fit different strategies better than others. Points of consideration include:
- Speed of Trade Execution: When day trading and scalp trading, this is very important.
- Costs: Many brokerages nowadays are commission-free, but you will want to look into any other costs or potentially hidden charges.
- Compliance: You’ll want to make sure your broker is regulated by a financial authority, like FINRA.
- Customer Support: When you have an issue, you’ll want to make sure your broker has excellent and accessible support.
- Platform: What tools do they offer in their platform? Do they have advanced charting, scanners, or other tools that would be helpful?
- Educational Tools: Do they offer free online education or a paper trading account?
Step 4: Start Trading
Once you’ve opened and funded your account, it’s time to begin trading.
How you do this will be based on your trading style and strategy, but it will begin with researching stocks and creating a watchlist. Looking at the news, SEC filings, or using Screeners and Scanners is a great place to start. A common recommendation is “trade what you know.” For example, if you work in the tech industry, maybe you focus on trading tech stocks.
When you start out the day, make a trading plan and stick to it. Dealing with money can be very emotional, especially with the rapid movement of some stocks. Know what stocks you’re trading, what your exit price target is, and figure out your stop loss so you don’t suffer massive losses.
Use Benzinga Pro and Trade Stocks in 2021
Benzinga Pro isn’t a brokerage, but a tool traders use to access fast news and data. News is an important aspect when making trades, and a lightning-fast Newsfeed like Benzinga Pro is a key tool to use to make sure you’re always up-to-date.
Easily filter the Newsfeed by source, categories, sector, and watchlist so you can reduce the noise and only get the news you need to know for your trading strategy.
It doesn’t end with the Newsfeed. Benzinga Pro has even more tools so you have everything in one place, including an audio Squawk, Movers, Screener, community Chat, Signals, and so much more.
Try it out free for two weeks, no credit card required. Just click here to get started.
Disclaimer: Benzinga is a news organization and does not provide financial advice and does not issue stock recommendations or offers to buy stock or sell any security. Benzinga Pro is for informational purposes and should not be viewed as recommendations. Benzinga Pro will never tell you whether to buy or sell a stock. It will only inform your trading decisions.You can find our full disclaimer located here.