How to Trade Stocks: Step-by-Step Guide to Buy (and Sell) Individual Stocks.

What is Stock Trading?

                           Stock trading refers to the act of actively selling and buying stocks to try to maximize profit on the market's daily fluctuations. For example, say an airline stock opens the trading day at $56 a share. By 3 pm, it is at $65 a share. Someone who buys $500 worth of that airline stock at the start of the day and then sells it at 3 pm would be a stock trader.

Step 1. Decide Which Platform You Want to Buy Stocks With

Once you feel that you understand the world of stock trading well enough to put some money into the market, you'll need to decide how you want to buy stocks. There are three main options when it comes to buying stocks:

1. Full-service stock brokers – This is the most popular way to trade stocks but also the most expensive. Full-service stock brokers are licensed broker-dealers and offer several services, including research, wealth management, and tax planning. It's best for people who want to trade individual stocks or options but don't have time to stay up to date on things like tax planning. You'll often be assigned a broker who handles your trades for you.
2. Discount stock brokers – If you want to trade stocks but don't need all the extra perks of having a personal broker to help you, then we recommend trying out discount stock brokers. These are brokers that are often accessible online and are a fraction of a full-service broker's cost. In fact, you can often trade commission-free.
3. A direct stock purchase plan – If you want to buy stock directly from a company without using a broker, you'll need to use a direct stock purchase plan. Not all companies sell their stocks directly to retail investors, and they often have restrictions in place, like when you can buy or sell the company stock.

Step 2. Make Sure You Have Your “Financial Ducks in a Row”

                   You should also consider adding a stop loss to each stock holding. That will limit your loss by triggering an automatic sale if the price falls. Full-service brokers have video tutorials that will show you exactly how buying stock works on their platform. Be sure you're familiar with the process before you begin.

1. Start with an emergency fund. This is a completely safe and liquid account with sufficient funds to cover at least three months' living expenses. It should be held in a bank account, where it's fully insured and available to be accessed quickly in an emergency. Having this type of account will keep you liquid, avoiding the need to sell investments to pay for emergency expenses.
2. Next, your debt should be well controlled. It's fine if you have a mortgage, a car loan, or student loan debt. But if you have substantial credit card debt, the best “investment” will be to pay it off or pay down. It will do you little good to pursue a 10% return in stocks when you're carrying credit card debt that's costing you 20%.
3. Make sure you have other investment types. At least some of your portfolio should be invested in bonds to reduce overall investment volatility. But it's also a good strategy to have money invested in managed accounts. These can include having some mutual funds or exchange-traded funds (ETFs) or even Robo advisors. Any of these options diversify your stock holdings between professionally managed and self-directed portions.

Step 3. Set a Budget

                                 You don't need a lot of money to start investing in stocks, but it's still a good idea to keep a monthly budget for trading. How much money you will need depends on where you invest. If you're investing in a discount stock broker that offers fractional shares, you can invest for as little as $100. However, if you invest with a full-service broker, you'll probably need at least $10,000.

When creating a stock budget, keep these questions in mind:

• How much of my profit will I reinvest into stock trading?
• If I lose money, how long will I wait before getting back into trading?
• What constitutes a “good trade” for me?
• How much of my portfolio do I want to expose to individual stocks?

Step 4. Learn To Do a Proper Research of a Stock

Make sure you know the company you're investing In. That includes both the company you want to buy stock in and the industry it operates in. Before buying any stock, you should first thoroughly research the company.

1. Look for companies that have an established track record over several years of increasing revenues, profits, and dividends.
2. Look closely at the company's product line and assess how competitive it is within its industry. Naturally, a more innovative company is likely to outperform any “me too” imitators.
3. It's also important to know the industry the company operates in, which means studying its competitors. The company's future performance will depend largely on how strong it is within its industry group. If it's growing faster than its competitors and introducing more popular products and services, it's likely to continue performing at a high level.

Step 5. Practice Trading with a Simulator

There are stock market simulators (also known as paper trading) that allow you to trade with fake money. This is a fantastic way to get your feet wet in the world of stock trading without actually exposing yourself to real financial risk. Play around with a few simulators to get a feel for them. We recommend using E*TRADE paper trading service, as it allows you to see the impact of your trades on your account before execution. This service is available both online or via the app.

Step 6. Practice Buying and Selling of a Stock

Once you've determined your investing strategy and have practiced with a paper trading app, it's time to start the actual stock trading!

Step 7. Secure Your Investments

Once you've bought stocks, you should make sure to keep your investments secured. While most brokerages have encrypted websites and other cybersecurity measures to protect your data, there are some things you can do yourself to make sure your funds are protected.

• Never give out your passwords or account information. Come up with passwords that are hard to guess and don't contain any personal or easy-to-guess information such as birth dates or names. If you can, consider using a password manager so you don't have to write down your passwords.
• Don't share information about your financial accounts online. This is especially true for social media.

Bottom Line: How to Survive (and Thrive) With Stock Trading

Being a good stock trader is less about being a hotshot like in a Hollywood movie and more about seeing a profit from your efforts. To that end, here are our tips for stock trading.

• Keep excellent records: This is for personal and tax reasons, especially if you are trading outside of a retirement account. You'll have to report your profits to the IRS, and excellent records will make that easy and help you avoid an audit. Plus, keeping tight records will help you track your own progress and growth.
• Build over time: There is no need to jump in with everything you've got in your first trade. You can and should take things slowly at first. Control your exposure risk factor and make sure that you are building an overall portfolio that works for your long-term and short-term goals.