Opening a brokerage account
The first step to begin trading stocks and options is to open a brokerage account. There are quite a few online brokers to choose from and it is no longer like the good old days when you had to actually call up your broker to buy or sell stock. Now a days placing a trade through your broker is as easy as clicking a buy or sell button. The most known brokers are ETRADE and TD Ameritrade both which offer great research and charting tools to their customers. Once you move on from stocks trading into options you may want to try some of the smaller guys out there who focus specifically on that and offer lower commission costs per trade.
To open a brokerage account you will need the following:
- A social security or tax identification number (required)
- At least $1000 in order to actually make some money after commission costs (recommended)
Placing your first trade
Once you have a brokerage account placing your first trade is easy. Research some of the companies you would like to invest in and their finances, also lookup their ticker symbol (a group of letters that identifies that company’s shares). For example Apple’s ticker is AAPL and google’s is GOOG. Once you know what you want to invest in just look up the symbol through the online portal that your broker provided you with. Once there its just a matter of entering how many shares you wish to purchase and pressing buy. It is important to try to always use limit orders in order to get a good price.
Plan a strategy
Choose whether you want to focus on the shorter term price movements of longer term. In other words, are you going to be a trader or an investor ? Answering this question will lead you to the next step of what you should do. If your time horizon is longer term you may want to focus on learnings all about the finances of the company you wish to invest in so that you can make long term predictions of that firms profitability. If your plan is to trade stocks for monthly income then get familiar with technical analysis and other useful techniques for analyzing shorter term price movements. If you want to learn more about technical analysis and market timing please read our article on swing trading