2. Getting started on stock market
This is a guide for beginners on getting started on stock market investing.
Before you start, you might want to read our other pages:
1. Why stock market investing and the pros and cons
3. Practice stock market with virtual money – a game
After you are comfortable with the above and ready to start, you need
1. An initial cash investment (usually for North American markets, $1000 USD or CDN is a good starting point), the more you have is better since commissions that you have to pay is usually $5-$30 (depending on your brokerage account). If you are doing constant trades, the actual money you make should be more than the commissions you are paying so you are actually making money.
Lets say on a single stock and short term trade you make 2%, and on a $1,000 stock purchase you have made 2% x $1000 = $20 and with commissions subtracted (lets say sell and buy commission of $10 each), you have made $20-$20 = $0. So this transaction did not make any money. If you have put more, lets say $10,000, you have made 2% x $10,000 = $200 and $20 commission taken away is $180, which is not bad. In conclusion, since the commissions are high and if you are making small percentages gains (usually short term trades have small gains), you are better off investing more money in an underlying stock.
2. Online brokerage account — this is an online platform that you can do stock purchase and sells, as well as checking prices real time, see how many orders are in, volume, graphs etc… . See list of online brokerages and comparison of their commission and services for getting started on them.
3. Now that you have opened an online brokerage account and have put an initial cash investment in, the big decision is which stocks to choose from for investing. Stocks can range from different sectors (ie. Technology, Pharmaceuticals, Commodities, Real Estate, etc… ), the right tools you are comfortable with and want to use (ETF, Indexes, Company stocks: small/medium/large cap, longs, shorts, options, futures, high dividend paying etc…). Since this is a large section and you are a beginner, we start with a simple example of purchasing a simple company stock (longing) and waiting for it to go up.
Disclaimer: Please note that we do not recommend any stocks here and don’t take any responsibility for losses you might encounter. This is simple a website to show you how to get started on stock market and not which stocks to purchase or how to invest. You have to make sure you consult with a qualified professional before making any trades.
4. Now that you have selected your stocks in step 3, and logged into your brokerage online interface, you are ready to place an order. Depending on the brokerage software interface, there is usually a field to enter the number of shares (for ie a simple stock purchase), the price you want to purchase or sell at, the expiry date of the order and few other fields that are optional such as stop orders etc… . Note that the stock exchange has to be open so you can make trades (ie business hours). Most of the time you can put an order in after hours, but it will not execute or fill if the the exchange is closed and it wait for the next opening day.
Assuming the exchange is open and you have put the order in, and the price and the number of shares criteria are met, your order will get filled. You have now executed your first order and own your first stock or have sold your first stock (for a short).
You can monitor the stock you have purchased via graphs, daily/hourly news etc to see the performance. If you are happy with the performance and decide to sell your stock (or recover for a short) after hours/days/months/years etc…, you can put another order for a sell (or buy for a short). If you are successful you should have made some money in this transaction. Congratulation on your first transaction!
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