How to learn to trade on the stock exchange: understanding the basics and rules of stock trading, tips and step-by-step instructions for novice traders

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

New investors taking their first steps in learning the basics of trading stocks and other assets should have access to several sources of quality information. Learning to trade can be likened to riding a bicycle for the first time, where trial and error is combined with continued persistence. Ultimately, these actions will lead to success.

One big advantage of stock trading is that it lasts a lifetime. Investors have years to develop and hone their skills. Strategies used twenty years ago are still being used today. Therefore, for new investors who want to take the first steps, the most relevant question is: “How to learn to trade on the stock exchange?”. Below are the main rules that will lead to success.

Open an account with a broker

Find a good online broker and open an account. First of all, you should get acquainted with demo accounts and take advantage of free trading tools andresearch results offered only to clients. Some companies offer virtual trading, which is beneficial because you can trade with fake money.

Read more information

Various books on the topic provide a lot of information and are inexpensive compared to the cost of classes, seminars and educational DVDs sold over the Internet. Even articles available online for free can be helpful in learning how to start trading on the stock exchange.

Find an experienced mentor

A mentor can be a family member, friend, former or current teacher, brokerage employee, or anyone else who has a fundamental understanding of the stock market. A good assistant is ready to answer questions, help, recommend helpful resources, and keep you in the mood when the market gets tough. All successful investors past and present had mentors in their early years.

Various thematic forums can be another source of questions and answers. They can also help you get started trading on the stock exchange. Just be careful who you listen to. The overwhelming majority of participants in such resources are not professional traders, not to mention successful market players. Heed the advice of users with a great deal of skepticism, and under no circumstances follow the trading recommendations literally.

Explore the success stories of famous market players

Studying the Greatest Investorspast years will provide you with perspective, inspiration and success. These include Warren Buffett, Jesse Livermore, George Soros, Benjamin Graham, Peter Lynch, John Templeton, Paul Tudor Jones and others. Each of them once started trading on the stock exchange from scratch. Many of them have gone on to release books about their success stories.

Read the news and follow the market

International news sites such as Yahoo Finance and Google Finance are a great resource for new investors. For in-depth coverage, watch only local news. Monitoring the markets every day and reading the headlines will allow you to see all the new trends, conduct third-party analysis, not to mention economic concepts and the state of big business. Pulling quotes and watching fundamental data can also be another good source. All this will help you in the question of how to learn to trade on the stock exchange.

TV is another way to track the market every day. Even turning on the TV for 15 minutes every day will expand the investor's knowledge base. Do not allow yourself to make a one-sided assessment of what you hear, just watch and listen to all the commentators, interviews and discussions. Over time, you will find that many analytics programs may not be very useful, and learn to choose exactly what you need.

See paid subscriptions

Paying research and analysis can be both educational and rewarding. Some investors watch professionals in the market in order toget more practical skills, instead of trying to learn new lessons on your own. There are many paid subscription sites on the Internet that can give you a lot of useful information on how to learn how to trade on the stock exchange.

Most important, be careful. Many paid subscriptions come from independent traders and services that claim to have fantastic returns and can "teach you how to succeed". 99% of them are scammers, especially if the ad claims that someone started trading on the exchange from scratch and soon made millions.

Participate in workshops and classes

Seminars can provide valuable information about the general market and specific types of investments. Most of them will focus on one particular aspect of the market and how the speaker has earned success using their own strategies over the years. For example, training is offered on how to start trading futures contracts on the exchange. Not all such seminars require payment. Some classes are free, which can be helpful.

As with paid subscriptions, be careful with classes and courses. Most of them are quite expensive and are sold with false promises of valuable knowledge. Their publicity stunt will lure you out of your money, set you up for quick success, and then give you a strategy that isn't even profitable to start with.

Practice trading through the simulator

How to start trading stocks and other assets on the stock exchange? FROMWith your online brokerage account, you should start with a small trade. Don't be afraid to start even if you use 1, 10 or 20 shares. If trading with real capital is not initially possible, consider using a stock simulator for a virtual trade. Various online brokers offer demo trading for practice.

One of the most common mistakes traders make is to dive into the whole trade and try to start working with large amounts. This often proves fatal and many new investors suffer big losses early on because of it. Proper portfolio allocation is extremely important. This is one of the most essential aspects of how to learn to trade the stock exchange from scratch.

How to trade assets for beginners

So, you have studied the theory and decided to start practical work. How to do it? How to learn to trade on the stock exchange on your own? You should use a scan and sort the results with a computer asset search software based on your specific trading criteria. You need to learn how to choose specific parameters in order to correctly determine your goals.

For example, take a small group of stocks and look for a buy signal. These are specific examples of candlesticks that are very reliable. Then you need to use a set of indicators that together confirm that the Buy signal is strong and that the stock will go up.

You should also use risk analysis to determine how long it will take for a stock to start selling, how many points a rally can take before being stalled by resistance or other short-term traders profiting.

Speaking about how to learn how to trade stocks on the stock exchange, you should consider the following. What entry price to use when placing an order with your broker? You must use a specific order type, not a limit order, in order to get the broker to fill it in the best possible way. Using the second type allows the company to control your account.

You need to plan your market entry based on chart patterns called resistance levels so that you sell the stock before it hits a profit (this can cause the stock to temporarily bounce back).

What should be kept in mind?

How to start trading on the exchange for a beginner? This process may seem complicated. Just remember that trading is a skill that comes with a set process.

Many times beginners assume that if they study technical analysis or MACD crossover signals or a few candlestick patterns, they have "learned how to trade assets". Unfortunately, these are just snippets of what you need to learn. This is what experts call teaser training, which makes you think you can trade. The main reason why beginners lose money whentrade is as follows. They just don't have enough training, education, or skill development to succeed.

To avoid a common mistake that most beginners make, you need to understand that trading can be a hobby, an urgent task for additional income, or a career. If it's just a hobby, then it doesn't matter if you make money or not, attend webinars and seminars, etc. Reading thematic articles on the Internet is enough for beginners to learn how to trade on the stock exchange. Hobby traders are just having fun trading and making profit is not the most important thing.

If you want to trade part-time, you will need to learn more. Knowing what your broker or forecasting company does is not enough. They may give you the basics, but they don't teach you how to trade. You will need to learn the complete trading process, which covers all aspects of trading from choosing the best asset to different types of analysis. This will help you know when and how to make a profit without losing what you have purchased.

If you want to be a regular or career trader, you will need to take it very seriously. Where to learn to trade on the stock exchange professionally? For this, special training sessions and lessons from great investors are suitable.

Learning how to start trading the stock market is so much more than just getting a brokerage account and browsingmultiple charts. This is even more than learning the technique of technical analysis or candlesticks. Successful online trading requires an understanding of the what, when, where, how and why of trading assets.

Which resources do you want to trade?

Simply reading or studying information about various assets in the news or using the advice of professionals is the best way to decide. Profitable trades can be made with assets recommended by the broker, but not in every case. You need to understand that company referrals and news ads can get you a lot of money when you listen to their advice and buy the assets they have in stock. They intend to sell to you.

When should you buy this or that asset? This is a huge question that you should be asking yourself. It is not enough to simply study the market, see the best starting price with the lowest risk, and then control how you buy shares, what you actually pay for them, and how much risk you take.

Where should you go to get accurate and reliable information about an asset before buying it? How to learn to trade on the stock exchange on your own?

The first source you should learn to use is a stock chart because the technical patterns tell you what is happening with an asset right now. Remember that many statistics are often three months old or more, so they can't tell you what's happening right now with a company and its stock. In contrast, diagrams receive information aboutcompanies ahead of you and retail news.

How much can you spend?

How to trade on the exchange for beginners to make a profit? How you buy and sell assets depends on the amount of money you are willing to spend. If you simply place an order "on the market", you will pay too much per share, as you are giving your broker permission to fill your order at any price under the "Best Bid Price". If you use a limit order, you will be buying low. A significant portion of time limit orders will put you in a downtrend in stocks. Assets can quickly pass in value. There are better entry orders that control the price you pay for this item.

Why are you trading this asset is another big question you need to answer before you buy. Recommendations from non-professional acquaintances is one of the most common beginner mistakes, and therefore many beginners lose a lot of money. There should be only one reason you ever buy an asset: the results of the analysis you do. It is this information received that indicates that the assets are going to move in price, have a low risk of moving against you, or, conversely, a very high profit potential. This simple rule will help you learn how to trade the stock exchange successfully.

What does transaction confirmation look like?

Thanks to the SEC and other regulations, when you start placing trades through your brokerage account, you will receive a trade confirmation. It willsent to you by mail or, if you have opted for paperless delivery, provided to you in some other downloadable format, such as Adobe PDF, whenever your broker completes a buy or sell order. Depending on your company, trade confirmation information will vary, but there are a few things that are included in almost all such documents.

What you can find in a trading confirmation from a broker:

• The name of the investment you are trading, along with the ticker symbol.
• Total number of shares bought or sold.
• Value or selling price per share.
• Commission that was paid to the company (depending on the specifics, if your broker acted as a dealer for you, you can see fixed income bond spreads).
• The trade settlement date, which indicates when the trade was placed.
• Settlement date, which is the day the money is paid and the investment is received.
• Total gross transaction value.
• Total net transaction value after brokerage fees.
• The number of the account where the trade was placed.
• Order type used; e.g. market order, limit order, etc.

Can I trade without a broker?

There is no doubt that the most popular way to buy and sell investments is to open a brokerage account, many are wondering how to buy stocks without a broker. Actually, it's possible. Direct investment offers some benefitsand disadvantages that you will need to weigh based on your personal situation.

You can buy shares without a broker by buying shares through a direct sell plan from the company. These are situations where companies sponsor a special type of program called a DSPP, or direct share purchase plan. These plans were originally conceived many decades ago as a business way to allow small investors to buy property directly from the company, working through a transfer agent or plan administrator responsible for handling daily paperwork and transactions. Most plans will allow stocks to be bought without a broker if they agree to either a set amount in installments (deducted from a checking or savings account monthly for six months) or they make a one-time purchase, often $250 or $500.

Typically, plan administrators collect cash from those who participate in a direct share purchase course and use it to purchase company assets either on the open market or freshly released from the business itself at a predetermined time frame. Just like you get a report from a bank, a report on direct share purchase plans comes in most cases on a quarterly basis, showing the number of shares you own, any dividends you receive, and any purchases or sales you make.

Some direct share purchase plans are commission-free trades. Others charge small fees, often $1 or $2 plus a few cents per share when buying, and more when selling. On practicethis is far below what you pay for a full service broker.

Closing word

Stock trading is the way in which anyone can participate in the stock market. It is a means by which many average investors can earn additional income, and which allows you to trade with ease and work less. However, if you start trading online without sufficient knowledge and education, you will lose money, and at some point it can be a huge amount.