Learn How to Trade stocks in 7 Steps

Property of a joint-stock company is divided by the number of shares set by the founders - one such share is called a stock. Holding company’s stocks means having a share of ownership in that company. Investing and trading in stocks is an attractive way to set money aside while you are busy with something else. Wisely investing in stocks, you invest in your future. The goal of investing in stocks is to obtain profit both from the dividends regularly paid to you and from the increase in stock prices. The simultaneous investment in the stocks of various companies that make up your investment portfolio offers you the biggest growth potential in the long run.

The best about investing in stocks - you make a lot of money holding a good stock in a prosperous company and getting dividends, also you can sell shares of your stock higher later and profit more.

The worst about investing in stocks - if there’s something wrong with the company, then your stocks suffer,too.

How to Trade Stocks

Before starting online stock trading consider the steps mentioned below.

1. Set Stock Investing Goals

Setting your own stock investing goals is necessary if you are either an experienced or a lay trader. Determine for yourself the following:

• Investment goals should be clear and definite, so you can measure them.
• Investment goals should correspond to current realities: age, income level, expenses etc., so they will be reachable.
• Proper investment goals should match your long-term targets, so they will be rational.

Why do you need to figure out stock investing goals?

• To track the journey you made from the start up to a specific point.
• To predict the further development of your stock portfolio.
• To be able to assess your finances and determine whether you’ve succeeded or not.
• Make decisions about the composition and timing of investing in stocks.
• To be accountable and disciplined, as well as to review the progress on a periodic basis (monthly, quarterly, annually)

2. Select the Stocks to Trade

Before you pick stocks to trade, consider the following principles:

• Get an idea of the future profitability of your portfolio and stick with those visions if the financial parameters of the companies in which you invest and the overall condition of financial markets do not change significantly.
• Mind your stock portfolio should be diversified to be less at risk.
• Choose the industry that suits your interests the most, stay aware of events and trends constantly affecting it.
• Identify the company(ies) leading the industry and focus on numbers.
• Prefer companies with a lot of funds on their balances to ones with debts.
• Keep in mind that, as a rule, a low P/E ratio is better than a high P/E ratio.

Then, for choosing stocks you need to identify companies the most suitable for your purposes.

• It’s important to use screening to filter stocks by specific criteria (sector and industry). There are additional features and other useful investment metrics offered by screeners.
• Search for the ETFs that monitor the performance of the industry you are interested in, and look into the stocks they invest in.
• Investigate technical analysis of stocks, economic and financial news, reviews on companies that are the targeted ones. Criticise and analyze everything you read.

5. Use Technical Analysis and Examine Price Charts

Traders with different strategies will definitely need different levels of functionality. However, tracking the market through stock price charts and using technical analysis of stocks to overview and predict the stock price movements are useful tools to apply.

Of course, you’d better develop the ability to read charts yourself. However, IFC Markets offers its customers to consider the Technical and Fundamental Analysis by our trusted experts and monitor Stock Price Charts on the website to make your trading easy and enjoyable. In practice it’s almost impossible to trade in stocks without enough history or an understandable pattern.

7. Build a Trading Strategy & Develop a Trading System

Any trader builds their own path to a successful trading and investment. But that will work out only with a certain and thought-out trading strategy and style. Strategies are based on many criteria, such as stock investment/trading goals, short/long terms, investment budget, trader’s income/expenses/age/character/time allotted for trade and so on. By the way, depending on the chosen trading strategies and the frequency of transactions we define “stock traders” and “stock investors”.

The following techniques are rather popular among traders preferring active trading:

• Day trading
• Position trading
• Swing Trading
• Scalping

For those willing to invest in stocks and expecting profit not here and now, but in the future, the techniques below can be useful:

• Buy and Hold
• Diversification of the portfolio
• Value Investing
• Growth Investing

Bottom Line

There is no doubt that investing in stocks and trading in them requires a certain amount of knowledge, you need to start gradually and continue self-educating. You need to accept that the funds invested in stocks will become profitable in the long term, and not right now. In order not to stray from the plan, you need to develop a special trading system taking into account the earning and payment capacity, stock investment / trading goals, skills, acceptable risks, time to engage in stocks, etc., and stick to this plan stably. Pick a stock, study it closely, practice your strategy on it, and only after analyzing the results can you move on to larger deals.