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What is stock trading?
:-There are two main types of stock trading:
Active trading is what an investor who places 10 or more trades per month does. Typically, they use a strategy that relies heavily on timing the market, trying to take advantage of short-term events (at the company level or based on market fluctuations) to turn a profit in the coming weeks or months.
Day trading is the strategy employed by investors who play hot potato with stocks — buying, selling and closing their positions of the same stock in a single trading day, caring little about the inner workings of the underlying businesses. (Position refers to the amount of a particular stock or fund you own.) The aim of the day trader is to make a few bucks in the next few minutes, hours or days based on daily price fluctuations.
-How to trade stocks
If you're trying your hand at stock trading for the first time, know that most investors are best served by keeping things simple and investing in a diversified mix of low-cost index funds to achieve — and this is key — long-term outperformance.
Open a brokerage account
Stock trading requires funding a brokerage account — a specific type of account designed to hold investments. If you don't already have an account, you can open one with an online broker in a few minutes. But don’t worry, opening an account doesn’t mean you’re investing your money quite yet. It just gives you the option to do so once you’re ready.Set a stock trading budget
Even if you find a talent for trading stocks, allocating more than 10% of your portfolio to an individual stock can expose your savings to too much volatility.
"If all of your money’s in one stock, you could potentially lose 50% of it overnight," Moore says.
If you want to invest, he says, you could start by saving $200 a month. When you get to $1,000, you could invest $500 of that. Consider the $500 you're not investing like a parachute. You might not need it, but it's there if you do. Other do's and don’ts include...
- Learn to use market orders and limit orders
Once you have your brokerage account and budget in place, you can use your online broker's website or trading platform to place your stock trades. You'll be presented with several options for order types, which dictate how your trade goes through. We go through these in detail in our guide for how to buy stocks, but these are the two most common types:
Market order: Buys or sells the stock ASAP at the best available price.
Limit order: Buys or sells the stock only at or better than a specific price you set. For a buy order, the limit price will be the most you're willing to pay and the order will go through only if the stock's price falls to or below that amount.
𝙇𝙚𝙖𝙧𝙣 𝙨𝙚𝙘𝙧𝙚𝙩 𝙩𝙧𝙞𝙘𝙠𝙨 𝙩𝙤 𝙚𝙖𝙧𝙣 𝙢𝙞𝙡𝙡𝙞𝙤𝙣𝙨 𝙙𝙤𝙡𝙡𝙖𝙧
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