5 Steps to Start Trading Stocks Online

Arielle O'SheaMar 23, 2021
5 Steps to Start Trading Stocks Online

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.


The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks or securities.

Steps

Maybe there's a product you use so much that friends or relatives say you should buy stock in the company. Or perhaps you received a windfall and want to invest a sliver of it in the market for fun and, if all goes well, profit.

If you’re itching to get hands-on with some active online trading, this guide will help get you started.

You might consider trading stocks if:

If you’re not yet steadily saving for retirement, you’ll want to start doing so before you start trading online. Maxing out a 401(k) and contributing what you can to an IRA is one of the most effective ways to build long-term wealth. .

Trading individual stock not only carries more risk, it requires more effort than investing in mutual or index funds. You need to actively watch your positions and understand whether and how to react to market moves. (Read more about the .) This is not the kind of risk most retirement investors want to take on.

» Stock trading:

If you'd rather stay largely hands-off after all, then investing in a portfolio managed by a  might be a better fit than trading individual stocks.

Before you trade anything, learn everything you can about investing and the markets. Mistakes can be costly.

There are a lot of free that teach how to trade through an online broker. Consider Morningstar’s Investing Classroom or one of the investing courses on Udemy.com.

Also, most offer their own educational centers and a staff of former traders or investment advisors who can guide you. Some brokers, such as , offer their clients paper trading, a simulation of trading that is a great way to practice without money or risk involved.

Choose an online broker with the tools and support to match your needs. In general, beginner traders should prioritize customer support, educational resources, and account and trade minimums. In addition, consider the online broker's stock trading software. New traders will want a platform that is streamlined, easy to navigate, and incorporates how-to advice and a trader community of peers to help answer questions.

» Learn more:

Your account is open, and you’re ready to start investing. What’s next? Picking stocks, of course, and that’s the hairy part.

Most traders start by doing a thorough analysis of a company, looking at public information  including earnings reports, financial filings and SEC reports, as well as outside research reports from professional analysts. Much of this should be provided by your broker, along with recent company news and risk ratings.

» Access stock research:

Start slowly, picking one or two stocks and investing a set amount of money that you are prepared to lose. You can plow gains back into the stock — or into other companies — but don’t add more money to the pot until you know what you’re doing and can put research into other companies.

» View our list:

Investing can be emotional, particularly for those new to the game. Losing money doesn’t feel good, and it’s easy to panic and pull out at the wrong time. It’s also easy to get swept up in the excitement of what feels like a winning stock.

That’s why it’s important to plan how much you want to invest at what price, and determine how far you’re willing to let a stock fall before you get out. Using the right type of trade order can help you stay on plan and avoid emotional responses. For example, stop-loss orders trigger a sale if a stock drops to a certain price, which can minimize risk and losses. Learn more about .

On a similar note...
Dive even deeper in Investing