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

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.

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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.