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How to Start Trading Stocks Online

So, you read a book about stock trading, or searched Google for something like 'online trading for beginners', but you're still asking yourself 'how to get started'?

If you're planning on joining an increasing number of neophytes (newcomers) trying to make money by investing in the stock market- this guide is for you!

Online Stock Trading Sites for UK Beginners

Sadly, most beginners (more than 71%) are going to end their experience of stock market trading in a poorer position.

Yet, despite becoming wiser as the journey progresses, very few will ever reach their full potential.

So, why is that? Research suggests the vast majority of people heading for failure, will all share one common flaw.

Yes you guessed it. Most individuals start trading stocks with little or ‘no’ experience and they struggle to master the core trading skills required to tilt the odds in their favor.

Okay, we accept that it’s going to take some time to learn the basic fundamentals about trading online. However, doing so is the optimum way of increasing your chances of becoming a successful trader.

What Does Being a Social Trader Mean?

In fact, despite assigning hard-earned money to stocks, shares, and forex markets, the number of traders who actually understand why and how prices move higher and lower is small.

Instead, many novices search for hot tips through a variety of sources (e.g. Stocktwits, YouTube), place their bets on one of the social trading platforms, and simply hope for the best.

Let’s take a closer look:

If you were to examine your current finances, how would you describe the situation? Would you say life is quite comfortable and you are not struggling for money. Or, would you say:

  • Life is challenging at the moment.
  • Earning a regular income is becoming increasingly difficult.

Note: The main section explains more about the business of stock trading and how you can use it to set up a passive income stream.

The point is, if you have already lost money through other ‘risky’ ventures or gambling activities, hoping that the financial markets will treat you with an element of kindness is likely to return the exact opposite.

Best Social Trading Networks

Two of the most popular trading platforms are eToro and Robinhood. They both have millions of users from well over 140 countries.

You might call them one-stop shops for online investing, for stock trading, and for venturing into areas, such as trading cryptoasset exchange tokens (cryptocurrency).

The leading social trading platforms all offer a free signup facility, commission-free investing, and a range of online tools.

Furthermore, a raft of social features (e.g. copying expert traders) tend to make the financial markets more accessible to the masses and ‘user friendly’.

Basic Steps for Trading the Markets Online

Anyone who has already traded online, and had some success, will tell you that the best-kept secret to trading financial markets is self-education.

Thus, being able to read stock charts and determine the trend direction of equities, indices, ETFs, commodities, and forex (e.g. through price action) is an invaluable skill for traders of all levels to master.

1. How to Open a Social Trading Account

Depending on your long term strategy, you may want to open a stock brokerage account through one of the online stock brokers. However, this help guide on how to start trading stocks focuses on setting up a social trading account.

Setting Up a Trading Account with eToro

  1. The eToro trading platform and app offers a variety of financial assets that you can invest in (e.g. Amazon, Facebook). The index page contains a green button in the top right corner showing the text ‘Join Now’.
  2. After clicking the button, the next web page will display an electronic form. You will need to enter all the personal data required to open a new trading account with eToro.
  3. After filling in the relevant information on the form, you will have the option of logging into the eToro trading platform via your Facebook or Gmail account.
  4. You should read through eToro’s Terms and Conditions (including their privacy policy) after submitting your information.
  5. The final step is indicating your agreement to the terms by placing a check mark in the box provided. Thus, clicking the button marked ‘sign up’ will submit your details for a final review by their compliance team.

IMPORTANT: You should familiarize yourself with the account interface and learn how to use the free trading tools. Most of the best social trading platforms offer a free ‘virtual trading’ facility for practice (up to $100,000 virtual money).

2. Developing a Rewardable Education in Trading

You might consider this section as being a stock market crash course for beginners. Even so, the learning part of being a social trader doesn’t end simply because you started placing trades on a platform’s interface.

The trading game can be costly if you focus too closely on one single aspect. Instead, tap into a wealth of freely available information, tips, and advice through various means, such as videos, books, and website tutorials (e.g. a social trading blog).

Novices can learn how to be a successful trader, and discover some of the advantages of all the different trading styles and strategies, by reading books. The best trading books might include:

  • The Nature of Risk: Stock Market Survival & the Meaning of Life – Paperback 1999 by Justin Mamis (Author).
  • Winning on Wall Street – Paperback illustrated 1997 by Martin Zweig (Author).
  • Trading for a Living (Psychology, Trading Tactics, Money Management) – 1993 by Alexander Elde.

Nowadays, electronic trading and derivative instruments link the equity, forex, and bond markets together in the blink of an eye. Thus, it pays to follow them on a daily basis and stay updated with the instantaneous changes in price action.

Further resources for new investors include popular news sites that cover the most sophisticated topics, such as Bloomberg, CBS, The Wall Street Journal (WSJ), and Yahoo Finance.

3. Learning How to Analyze Trading Charts

So, we already stressed the importance of being able to decipher price action. In most situations, you will use two separate methods to achieve this, using technical analysis (TA) and fundamental analysis (FA).

Importance of Understanding Technical Analysis

In simple terms, studying the stock charts in a range of differing time frames constitutes one form of technical analysis. Most experienced traders agree that understanding how price action works is even more beneficial than having to study the underlying fundamentals.

Why is that so?

Well, even as a beginner, your experience with trading charts and technical analysis will set you on the right path for determining ‘possible’ and ‘probable’ price predictions.

In theory, prices of securities can only move in one of three directions – higher, lower, or ranging sideways (e.g. staying relatively unchanged or choppy). Therefore, understanding these probabilities will influence whether your trade is a buy (taking a long position) or a sell (shorting).

Note: Technical analysis does not predict prices. It can help to determine the risk of a trade, time a trade, and provide direction to the path of least resistance. Thus, charting presents possibilities, not certainties.

Why is Fundamental Analysis Important?

You might think fundamental analysis offers a better path to profits because it tracks growth curves and revenue streams. But, despite tracking company spreadsheets, it is unlikely to provide you with enough information – by itself – for you to survive your first year as a trader.

The bottom line is this:

Even though ‘buying the dip‘ (e.g. buy low and then sell high) is a common trait for novices to set in motion. You should always consider trading as a three-dimensional playing field.

As a result, making it a habit of studying each security in at least three different time frames will pay dividends. So, for most traders, this means looking at the hourly time frame, daily price action, and the weekly charts.

The Value of ‘Virtual Trading’ for Beginners

Like most things in life, practicing is an integral part of the learning process. There is no such thing as a ‘perfect’ trader. Hence, beginners should always practice ‘virtually’ before they even think about committing to a trading stake (e.g. placing real funds into a stock).

Virtual trading, also called paper trading, is an ideal way for newbies to follow real-time actions in the markets.

How does that work?

Using a virtual trading account means you will be buying and selling decisions without risking any of your capital.

Some of the advantages of training on a stock market simulator (e.g. trading on virtual software) include:

  • Getting used to how the interface works (e.g. desktop and app versions).
  • Practicing how and when to place buy and sell positions.
  • Experimenting with leverage, using a stop loss, and taking profit.
  • Learning about copy trading (and interacting with the community).
  • Tracking a theoretical performance record.

What are Virtual Trading Simulators?

A virtual simulator has the same look and feel as the ‘live’ version and it allows you to make numerous trades. Thus, you can experiment with different holding periods and different trading strategies.

The fun part of practicing with a virtual account is being able to analyze your results and identify any significant flaws.

Here’s the important part:

You might be wondering when you should make the switch to the real version and start trading manually – with real funds? Well, the answer varies from person to person.

Some of the weaknesses that show in simulated trading are most likely to display themselves in real positions as well. Yet, learning to cope with ‘fear and greed’ is part and parcel of this risky industry that we will all struggle with at some point.

For example:

The most dangerous emotions that we will experience as stock traders will not show up in any great depth when paper trading. The absence of risk simply fails to engage them.

In short, fear and greed are only experienced during actual profits or losses. Unfortunately, it is a psychological aspect that will force the vast majority of newcomers out of the game before too long (even more than making bad decisions).

Tip: One of the most common mistakes beginners make is clicking the wrong button at the start of a trade (e.g. selecting ‘sell’ when you intend to ‘go long’ on the asset class).

How to Further Your Education as a Trader

A career in social trading doesn’t end once you start placing bets on different asset classes. In fact, nothing could be further from the truth!

Never underestimate the importance of furthering your education, even as you proceed to higher levels. There are several ways to improve your trading strategies. Typical examples include online seminars and in-person classes conducted by professional traders.

Tip: Most beginners will reap big rewards by following a ‘mentor’ (e.g. someone with a hands-on approach to trading). Moreover, many of the guides and coaches offer free lessons online as part of their repertoire for educating the masses.

Related Help Guides

Note: Another section explains more about Capital Gains Tax when you sell stocks and shares and the rates you would pay on any realised profits.

How to Trade Stocks Online in United Kingdom