Stock Trading for Beginners: 5 Things Every Beginner Should Know Before Hitting the Buy Button

By Motley Fool

Trading stock online lets you assume a strong role in managing your investments. You'll have the ability to make instant adjustments to your investments, buying and selling stocks based on real-time information feeds. Even if you don't opt to micromanage your portfolio by making changes on a daily basis, you may enjoy the freedom and ease that online trading provides. But before you start trading stock online, here are some tips that make stock trading for beginners a lot easier to understand.

1. Find the right broker at the right price.Look for an online broker who charges a competitive rate (such as $5 to $10 per transaction) and provides original research on your stock options. A good broker also provides research tools and backup methods of trading, such as making transactions by phone or fax.

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2. Get the software support you need.Online stockbrokers often provide software that helps you to screen potential stocks, chart your investments and manage your portfolio. Look for a broker who offers free software for these purposes.

3. Make sure you have up-to-date information.To make the most of your ability to trade stocks instantly, you will need to access the most relevant stock updates. An online broker typically provides tools such as streaming charts that show changes in the stock's value as they occur as well as streaming stock news.

4. Use the tools that brokers provide to help you make smart stock picks.Knowing how to use trading tools will help you to trade stocks online more successfully. For example, you should know how to set limits on the price you're willing to pay for a given stock. Setting your limit allows you to quickly trade at the current price while ensuring you won't go over the amount you're willing to pay or under the amount for which you're willing to sell. Starting with small-scale, low-pressure trades will help you to become comfortable with the tools at your disposal.

5. Don't be in a rush.Online trading is quick and easy, the U.S. Securities and Exchange Commission asserts, but it notes that online investing takes time. The speed of buying and selling stocks online doesn't eliminate the need for substantial research, in other words. To compete in a fast-paced online environment, you'll need to thoroughly research trends in the stocks you're considering and become savvy about general market trends.

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