Are you interested in stock trading? Are you curious about what strategies could potentially lead to trading success?
Trading stocks doesn’t have to be complicated … and it definitely doesn’t require an advanced math or physics degree. But it does require a lot of research, studying, and hard work to understand what makes the market move.
So many new traders fail because they don’t take the time to learn the basics.
You’re already ahead of the curve by finding this article. It tells me that you want to educate yourself. You want to do better than the many new traders who blow up their accounts.
By seeking out all of the information that you can about trading before you start putting your money on the line, you’re taking a big step toward smart trading.
Want to become an intelligent trader, but not sure how to get started trading stocks? Check out these seven tips.
Table of Contents
- 1 What Is Stock Trading?
- 2 Risks of Stock Trading
- 3 How Does Stock Trading Work?
- 4 Types of Stock Trading
- 5 Stock Trading for Beginners in 7 Steps
- 6 Trading Challenge
- 7 Bottom Line: Are You Ready to Start Stock Trading?
What Is Stock Trading?
Since this is stock trading for beginners, let’s start at the very beginning. What is stock trading, anyway?
When many people think of the stock market, they imagine something that’s not quite trading. Like Warren Buffett buying stock in a massive company and sitting on it for years, collecting dividends as the company grows. That’s NOT trading — it’s investing.
Stock trading is a more active strategy. Traders buy and sell as a stock’s price fluctuates.
Nearly every stock fluctuates in price every single day. If you know what you’re doing, you can potentially learn to ride the momentum of these price movements.
Personally, I find trading way more exciting than long-term investing … and for me, it’s been the best way to exponentially grow a small account in a short period of time.
What Is Penny Stock Trading?
Penny stock trading refers specifically to trading low-priced stocks. In spite of the name, a penny stock is actually any stock below $5 per share.
These are typically small companies. They might have just a few products, or they might be in an emerging industry.
This is important: many of these companies will eventually fail. Unlike a large-cap company, you won’t invest your money for years and years and hope for a return.
Penny stock trading is not investing. It’s typically a short-term strategy that allows you to potentially profit from the volatility of fast-moving low-priced stocks.
It also has a greater potential to grow your account quickly, as opposed to buying slow-moving large-cap stocks.
You see, when you trade large-cap stocks like Amazon, Netflix, and Microsoft, you’re competing with the world’s biggest, smartest, and richest traders, banks, and hedge funds. I’m not interested in that — are you?
With penny stocks, most of your competition is absolute morons. Billionaires don’t play the penny stock game because there aren’t billions to be made … just millions.
I’ll take millions — totally fine with me. Good enough for you?
In the penny stock trading world, it’s not uncommon to see a stock move 20%–100% or more in a week, or even within a day. If you can consistently catch just a part of some of these moves, it’s not hard to see how it could potentially grow your account quickly.
If you’re willing to learn the right strategy, develop your discipline, and watch the right stocks, penny stocks could be a great niche for you … just ask any of my top students.**
Risks of Stock Trading
The biggest risk of stock trading? Well, you could lose money. In some cases — if you short sell, for instance — it’s even possible to lose more money than you put into the market in the first place.
Risk is a big part of stock trading, and it’s always going to be part of it. You can’t change that.
With risk comes reward: it’s the volatility of stocks that can make them spike in price and could potentially deliver massive profits.
But you don’t need to love risk to be a trader. In fact, I hate it!
The risk inherent in the market should serve as motivation to avoid losing money … The best way to do that is by thoroughly researching and planning out your trades. Base your trades on factual findings rather than gut feelings.
How Does Stock Trading Work?
Trading stocks really isn’t that complicated. All you really need is a brokerage account, an internet connection, and a computer. From there, you’ve got so many different potential directions.
Types of Stock Trading
There are a ton of different approaches to stock trading. Some common ones?
Day Trading: This is trading where you open and close a position within the same trading day. Yep: you buy and sell the stock between the market hours of 9:30 a.m. and 4 p.m.
Position Trading: Long-term trading. With this style of trading, you invest in a company for a longer period … months or even years.
Scalping: Super short-term trading where you try to profit off of micro-fluctuations. You might hold a position for mere minutes. This type of trading relies on volume.
Swing Trading: A moderate approach where your positions are less based on a specific time period and more on maximizing the price “swings” of a trend. A position might last anywhere from a few days to a few months.
In terms of strategy, there are two basic approaches to trades, regardless of duration: going long and going short.
- Going long: This is where you follow the “buy low, sell high” model. You buy a stock hoping the price will go up, and then sell at a higher price for a profit.
- Going short: Also called short selling, this is where you try to profit from a stock that’s dropping in value. You borrow shares from a broker and sell them. You then buy the shares back at a lower price (if the stock price drops!). Finally, you’ve gotta return the shares to your broker. Your profit is the price difference minus any fees. Yep, it’s a thing! You can learn more about short selling here.
Stock Trading for Beginners in 7 Steps
Ready to get started on your trading journey? These 7 simple steps will get you started.
#1 Open a Trading Account
You can’t start trading without a brokerage account. This is the person or firm that executes trades on your behalf.
I like E-Trade and Interactive Brokers. But you might find a broker that works better for your trading style. If you need more info on all the different types of brokerage accounts, read my comprehensive guide.
You don’t need an account that’s too involved or fancy. Some brokers will offer you leverage, an over-hyped trading platform, and other unnecessary features … Just keep it simple.
One huge piece of advice I have for new traders: no matter what your strategy, if you’re just getting started, DON’T USE LEVERAGE!
Newbie traders can get sucked into brokerage marketing and blow their accounts with leverage. They don’t even know what they’re doing. If I had a dollar for every time I heard this totally avoidable turn of events … I’d be even richer.**
Don’t add your name to that list of sob stories … Just stay away, at least until you know what you’re doing.
#2 Technical and Fundamental Analysis
Technical analysis involves studying charts, price action, and trading volume. Here, you look for patterns that have worked in the past that provide clues to what might happen in the future. It can help you anticipate explosive stock price moves just before they happen.
Fundamental analysis is the study of what a company actually does. What technology is it developing? How much money does the company make each quarter? Things like that.
Penny stocks generally don’t have much in the way of solid fundamentals. Mainly, what you’ll focus on is the hype and excitement around a stock. You want solid news stories and company announcements.
A lot of traders rely on just one type of analysis. I definitely rely more on technical analysis. But both are important. You should definitely consider both sides before settling on a trade.
And get used to it! Analysis is something you need to do every single day as a trader, no matter how long you’ve been trading.
#3 Practice Before You Start Trading
Wanna test your skills before putting your money to work? Try paper trading.
Paper trading is like fantasy sports, but for the stock market. It’s a stock trading simulator where you pick stocks to trade. You enter the buy and sell details and watch what happens to your imaginary account balance as the stocks fluctuate in price.
Yeah, actual trading is different because your real money is at risk. So don’t let it get to your head if you’re up with a paper trading account. It’s common to get a false sense of confidence.
Even if you make money paper trading, it doesn’t guarantee that you’ll make money with real trades. But if you can’t make money paper trading, you probably have no business putting your real money in the market.
Start paper trading now. It’s a great way to get experience without risking any capital. Head over to StocksToTrade and check out the simple and easy-to-use paper-trading options on the platform.
#4 Learn Stock Market Terms
If you went on vacation to Paris, you’d probably want to master a few key French phrases. You don’t want to make a fool of yourself when trying to find the bathroom or ordering dinner, right?
The stock market might not be a foreign country, but it does have its own lingo. And you’ll be doing yourself a service if you start getting fluent.
P/E ratios, top daily gainers, dividend schedules, short selling … you need to get used to phrases like these and understand what they mean.
To a certain degree, this knowledge will come with time. But to get a head start, here’s a big list of terms to know. Bookmark it!
#5 Create a Stock Portfolio of High-Volume and Volatile Stocks
When trading low-priced stocks, you’re not looking for stability and long-lasting success. In fact, you probably shouldn’t even care about or trust the companies at all.
Instead, you should be looking for high volume and high volatility. Your portfolio should be ever-changing. These aren’t stocks that you’ll hold for years and years.
High volatility might sound scary, and it should sound scary. These rapid price swings can be dangerous…
But if you take the time to do your research and learn to recognize key trading patterns, this volatility is also what can potentially deliver amazing profits.
#6 Choose the Best Laptop for Stock Trading
One of the best things about trading is that you don’t need a lot of supplies and materials. All you need is an internet connection, a brokerage account, and a device to trade from.
These days, you can trade even from your smartphone. But personally, I love trading from a laptop because I travel a lot. It also has a decent enough screen so I can easily read charts.
If you want to be a serious trader, it’s worth investing in a high-quality machine. You want to easily view charts, run scanners, and have multiple windows open at any given time.
Curious about some of the best laptops out there? Check out my personal suggestions in this post.
#7 Keep Learning
You’ve probably heard that most traders fail. Well, I won’t tell you any different. It’s a simple fact.
But that doesn’t mean you have to be one of them. The key to being a good trader? Keep learning. All the time. Even 20+ years into my trading career, I’m still learning all the time.
I know that’s boring advice, but it can yield to not-so-boring results. For me, it’s led to a lifestyle where I can trade from anywhere in the world. I’ve traded from Australia, Africa, Italy … the list goes on.
Too many people who try trading are doing it to get rich quick. That’s their mentality, and frankly, they’re lazy. They don’t have a plan. They’re not willing to put in the work necessary to recognize patterns or learn how to trade. They don’t learn from their mistakes.
This is one of the main reasons I teach. I want you to learn the key patterns and methods necessary to trade. I want you to be a self-sufficient trader.
I want to be the mentor to my students that I never had. I wish there was someone like me teaching when I started out. I’m sure I could have become a millionaire faster.**
That’s why I started my Trading Challenge.
I’m not the only stock market trading educator around. If you’re lazy and just want hot stock picks fed to you … good luck! You don’t have to learn from me.
It doesn’t always happen fast. Just ask my student Tim Grittani. He lost money for nine months before turning the corner to profitability. He studied his butt off. He watched all my videos and worked to turn his tiny $1,500 account into over $8 million … so far.**
Articles, daily alerts, webinars, and an extensive video collection are just a few of the many tools you’ll have access to in the Challenge.
I’m here to help you become an intelligent, self-sufficient trader who understands how to maximize profits and minimize losses over time. Ready to join? Apply now.
[**Note that these results aren’t typical. My top students and I have put in the time and dedication to build exceptional skills and knowledge. Most traders lose money. Always remember trading is risky … never risk more than you can afford.]
Bottom Line: Are You Ready to Start Stock Trading?
Learning to trade stocks has given me an amazing life. I never imagined any of this when I was a kid growing up in middle-class Connecticut.
This is a business where you can potentially make millions of dollars from anywhere on the planet. It’s amazing. Yes, you to have study and work hard — but you can do it from anywhere. That freedom is priceless.
When I started trading, there was no access to the mentors, educational resources, or the stock trading apps that you can easily find today. So I’m serious when I say there’s never been a better time to start your stock market trading journey.
So what’s stopping you? Get to work! Here are a few resources to get you started…
Get access to over 6,000 video lessons — subscribe to Pennystocking Silver.
Get the book my student Jamil wrote, “The Complete Penny Stock Course” here.
Access my no-cost resources for new traders here.
Do you think you have what it takes to be a successful trader? Why or why not? Leave a comment below.