CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing all your money. Read our full Risk Warning.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Based on your current location/IP address, you will be provided services by Fortrade Cyprus. 76% of retail CFD client accounts lose money

Stock Trading for Beginners in 6 Easy Steps (+ Bonus Tips)

Filip Dimkovski - Writer for Fortrade
By Filip Dimkovski
Joel Taylor - Editor for Fortrade
Edited by Joel Taylor

Updated November 14, 2023.

Candlestick graph of stock prices superimposed over stacks of coins

Stock trading is attractive to many interested in the market, as it may bring potential profits. However, it carries considerable risks. When trading stocks, you're always risking at least some of your capital, which is why many are scared to start.

But this doesn't mean that it can't be learned and can't be mastered. To become a successful stock trader, one must be ready to do a lot of hard work and extensive research.



Disclaimer

This blog post serves as an explanation of the general process of stock trading and is not meant to be considered as advice. Additionally, Fortrade doesn't offer general stock trading, but rather trading with the price changes of stocks through contracts for difference (CFDs).

Important Considerations Before You Start Trading

These are some of the main considerations to make before you start:

Determine Which Kind of Trader You Want to Be

The first step is to determine your trading goals. For most people, this falls into two categories: short-term trading and long-term investing.

Short-term trading refers to holding stock positions for a limited time, from a few minutes to a few weeks. Being a skilled short-term trader requires being able to read indicators and follow market trends while managing your risk level.

On the other hand, long-term investing is largely passive. It refers to opening a stock position and holding it for months or even years. Long-term investing is a lot less risky but also less profitable than the short-term approach.

Conduct Due Diligence & Stay Abreast of Current News

You should always do your research before buying stocks. This includes looking into the company's history, reading its financial statements, and analysing its business model.

It's also crucial to stay updated with current news because macroeconomic events can significantly impact stock prices.

Develop a Trading Strategy Suited to Your Goals

Your strategy should include the types of stocks you're going to trade, the risks you're willing to take, and when you're going to enter or exit trades.

The goal is to find a strategy that works well for you and that you're comfortable with. Usually, trend trading and range trading are the best starting points for beginners.

Formulate Appropriate Risk Management Strategies

Because of the financial risks involved, it's vital that you have a solid risk management strategy in place. This includes setting stop-losses and taking profit levels into account.

A guiding principle is that you should never risk more money than you can afford to lose.


  • Best Platforms—Utilize the power of MetaTrader4 and ProTrader
  • Practice Trading Risk Free—use virtual money on our demo account
  • Expert Support—Consult with our experienced market experts


How to Trade Stocks

1. Open Your Trading/Brokerage Account

To start trading stocks, you'll need to open a brokerage account. Usually, you can open up an account by visiting a broker's website or calling them.

Before choosing a broker, ensure they have the features you expect, like reliability, low fees, and educational material.

» Looking for a reliable option? Learn more about opening an account with Fortrade.

2. Define Your Stock Trading Budget

Once you set up your account, it's time to start thinking about how much money you're willing to spend on stocks. This includes the amount you're willing to lose in case of a market crash or other unforeseen events.

It's important to be realistic when defining your budget, as it will help you stay within your limits and avoid financial ruin.

3. Learn How to Use Market & Limit Orders

Learning how to use market and limit orders is crucial for a beginner. A market order is an order to buy or sell a stock at the current market price. For example, if you want to buy Apple shares, you would place a market order to buy those shares at whatever the current price is.

A limit order, on the other hand, is an order to buy or sell a stock at a specific price. So, if you wanted to buy Apple shares at $140 per share, you would place a limit order to buy those shares at that price. If the stock never reaches that price, your order will never be executed.

4. Leverage Your Strategy to Identify Trading Possibilities

Finding trading possibilities includes identifying stocks that are undervalued by the market or that are about to experience a significant price movement. You'll need to use various tools, like technical or fundamental analysis, to find these possibilities.

5. Execute Your First Trade

After finding a stock that fits your criteria, it's time to place your order. If you're using an online brokerage, this will involve logging into their website and placing your order.

Usually, you'll need to specify the type of order (market or limit), the number of shares you're buying or selling, and the price you're willing to pay.

6. Measure Your Returns Against an Appropriate Benchmark

After you've made your first trade, it's essential to measure your returns against an appropriate benchmark. This will help you see how well your stock trading strategy is performing and whether you need to make any adjustments.

One popular benchmark that traders use is the S&P 500. This index is a good proxy for the overall stock market, so if your returns outperform the S&P 500, you're doing great.

3 Bonus Tips for Mitigating Stock Trading Risks

In addition to the above advice, here are three bonus tips for novice traders:

1. Diversify Your Portfolio

When it comes to investing, one of the most important things you can do is diversify your portfolio. This means owning a combination of different stocks and diversifying your range of assets by including bonds, cash, and crypto.

2. Build Positions Gradually

When starting out, it's crucial to build your positions gradually. This means buying a little bit of stock at a time instead of dumping all your money into one company. By doing this, you'll minimize your risk and give yourself time to learn the ropes.

» Ready to continue learning about trading? Head to our free Forex & CFD beginner's trading courses to hone your skills.

3. Practice With Paper Trading

Also known as demo trading, paper trading is a great way to practice stock trading without putting any of your money at risk. It involves using virtual money to trade stocks in real-time. Not only will this help you get comfortable with the process, but it will also allow you to test different strategies.

» Keen to start practicing? Try a free demo for all the experience with none of the risk.

Start Your Trading Journey

Stock trading can be one of the ways to earn a potential income. However, it's important to remember that there are risks involved. By following the tips we've outlined above, you can increase your chances of success and minimize your risk of loss.

If you're a beginner, we highly encourage thorough due diligence and using a proper risk mitigation strategy. This way, you'll learn a lot about stock trading and risk mitigation.