How to Begin Online Stock Trading

The number of investors that have been drawn to trading stocks online in recent years has risen significantly, and investors that rely on full service brokers have been on the decline. Online stock trading provides self-directed investors the ability to trade stocks for just a fraction of the cost of a traditional full-service broker and most platforms are easy enough to use. The combination has made online trading very popular among investors.

Setting Up Online Trading Accounts
In order to trade stocks online, investors need to open up an account with one of the many online discount brokers. There are a number of good ones to choose from and most firms charge somewhere in the range of $4 to $20 in commissions to execute a trade. To open an account, some basic information must be provided and the account holder must sign several documents accepting responsibility for the activities conducted in the account. To open an account, the holder must be at least 18 years of age and have the legal capacity to enter into a contract.

Funding Online Trading Accounts
Before trading can begin, the account must be funded. There are several ways to fund an account. Traders can simply write a check from another financial institution or one can transfer securities that were being held with another online brokerage into the new trading account. Obviously, the account must have a cash balance of sufficient size to cover any trades.

Online Trading Stock Orders
When buying or selling a security, investors can either place a market order or a limit order. A market order is the current price of the stock while a limit order is a specific price at which the investor is willing to buy or sell the stock. Market orders are almost always executed more quickly than limit orders. Depending on the volatility of a stock’s price and the limit set on the purchase or sale price of that stock, the order can be executed quickly or not at all. Orders that do not get executed expire at the end of the trading day.

Bid and Ask Price
The bid is the price at which someone is willing to pay for a security while the ask is the price someone is willing to pay for the security. In a stock with high volume, the spread between the bid and ask price is usually quite small. If a stock is very lightly traded, the bid and ask spread can be much larger.

Begin Trading With Cheap Online Stock Trading Picks

Investing has now become very easy through online stock trading. If you are a beginner, the best way to start investing is with small and cheap online stock trading picks.

With online investing, you have hands-on involvement in your investments. There are many brokerage firms that offer start-up accounts, as well as affordable trading for beginners. You essentially become your own stock broker, directly connected to the goings-on on the stock market floor. Try checking out the varied online trading firms and pick one that gives you the best leeway in terms of your experience.

If you want a hands-on training on investing, there are several online brokerage firms that can guide you. For these beginners, many online stock experts say that starting with small picks is the best.

Being guided by online brokerage firms is another advantage for a beginner doing online trading. A lot of brokerages offer cheap trading for beginner-investors, before allowing you to move to bigger and riskier stock picks.

Beginners can start investing for as low as five or three, or even one dollar per share! Once you get the hang of doing cheap online stock trading investments, then you can move on to bigger shares.

A third advantage is that you may be able to get updates on the current stock market trends. Many online brokerage sites offer real-time quotes as part of their service and so you do get informed of the current trends and shifts in the stock you’re interested in (buying or selling). Other financial and market online news sites may also offer information about the stock market, and specifics stocks and options you may be looking to buy. However, what they don’t tell you is that making stock trades online is not instantaneous as it is on the floor.

From the time you make out a buy offer, till you get the stock that you want, twelve, or even twenty-four hours may have elapsed. This is where things can get sticky, if the market moves quickly on the stock of your choice, then the trading price that you might be seeing on your PC screen could may not what be the same as the real-time price. Apart from starting a cheap online stock trading account. One thing that the Internet can’t duplicate is the market hours. So, be sure to keep a pulse on what’s happening in your market so you can make adjustments to you online buying and selling.

Of course, the best obvious advantage with starting small trading is that you can get a feel for online trading, while still learning the ropes. It’s a little like online poker: You start with nickels and dimes before you head to the Big Game. Starting with small and cheap online stock trading as opposed to starting with bigger valued stocks is that even if it is, just five, ten or even twenty dollars of your money, you learn and begin forming your own stock trading strategy. This way, your online stock trading experience begins to grow and making the transition to bigger accounts would be easier. Heck, you could probably do it full-time, in no time.