According to most people, stock trading is the traditional way of trading, and it is the type of investment that most people associate with the word “trading.” When buying stocks you invest your money by either buying a share of a company or by speculating on the price of that share. The idea is to wait until the company does well and the stock increases in value before you sell the stock for a profit.
Stock trading is a versatile form of trading that can be used for both long-term positions and investments or for day trading. We are aware that it can feel daunting when you first start trading stocks and if you’re a beginner you probably have a lot of questions. Because of this, we’ve decided to dedicate this page to everything related to stock trading. On this page, we will try to provide answers to all the question you might have.
In order to offer a comprehensive guide that covers all the aspects of stock trading, we will focus on several subjects. For example, the best stock trading services, the differences between speculating and investments, and we’ll explain what an index is before covering strategies for beginners. Our aim is to explain how you can best trade stocks by sharing our own experiences with you.
How do you buy stocks?
Typically, you buy stocks in the form of securities on the stock exchanges that are often depicted in Hollywood movies. However, the picture of stockbrokers yelling numbers into phones surrounded by massive price boards is somewhat misleading. You see, as a private investor, you will not trade stocks like this. Instead, you will use a digital service that acts as the middleman between you and the exchange. The middleman can either be a bank, a stock brokerage, or an online broker. You will in other words not actually do the trading yourself, but instead you will tell a service how to trade for you for a small fee. In return, they can offer you trading signals, advice, and much more.
To offer a trading service the provider needs to be regulated and have an appropriate license. Depending on where you live and what service you use, the regulating authorities differ. When it comes to banks, they are normally regulated by the central bank in the country from which they operate. Brokers can be regulated by the exchange and online brokers can be regulated by third party authorities. In Europe, the two leading authorities for online brokers is the Cyprus Securities and Exchange Commission (CySEC) and the Financial Conduct Authority (FCA) in England. On the American market, it is the Security and Exchange Commission (SEC) that regulates all trading, including the exchanges themselves. The SEC is one of the toughest authorities in the world which is the reason why many forms of speculative trading are banned in the US.
When you use an online broker to invest in stocks, you don’t buy the actual stock, instead, you speculate on its price. Your goal is to predict how the stock will move and bet your money on that prediction. Many people prefer to trade stocks this way since you have more control over your investments. Another perk of speculative stock trading is that you can bet your money on bearish markets and therefore make money from companies that aren’t performing well, but more on that further down.
Get Started with Stock Trading
If you’ve never traded stocks before you need to decide on how you would like to get started. Would you prefer to speculate on the market and make a profit from quick market movements? Or would you actually want to buy and own a share of a company? There is no right or wrong answer to this question. In fact, you can combine the two types of trading if you want to. However, we do recommend that you begin with one form of trading before moving on to the next.
In an attempt to help you decide, we have written detailed descriptions of both types of stock trading below.
Trade Stocks with an Online Broker
CFD – The most common way of speculative stock trading is so-called CFD (Contract for Difference) trading. A CFD is a contract that’s written between you (the buyer) and the broker (the seller) which contains information about the value of an underlying asset (in this case a company share) as well as trade terms. Your job is to predict how the stock’s value will develop – will the price of the stock increase or decrease? – and then buy a CFD that represents that prediction.
Many people, including ourselves, prefer trading like this because it allows for quicker deals and more action. CFDs are perfect for everyone looking to day trade. As we mentioned earlier, you can also use CFDs to speculate on negative trends and make a profit from companies that are failing. Although, it is more common to speculate on increasing stocks.
Furthermore, CFDs can be used for more than just stock trading. In fact, you can buy these contracts on pretty much any available market including commodities, currencies, cryptocurrencies, etc. CFD trading also offers the possibilities of using leverage and margin which allows you to invest smaller amounts for large payouts but also carries a bigger risk.
Binary Options – An alternative way to speculate on the stock market is by using a binary options broker. Unfortunately, binary options have gotten an undeserved bad reputation lately and the market is constantly shrinking. In many ways, binary options and CFDs are similar. The biggest difference is that binary options have fixed times and the trades are usually much shorter.
Whether you want to trade stocks as CFDs or binary options you need to use a broker. Since the broker will handle your money and private information, it is important that you find a regulated broker with an appropriate license. It is also important that you find a broker that you feel comfortable using.
Recommended Brokers for Stock Trading
We have tested and evaluated a ton of brokers looking for the best options out there. The few options that we consider the best we have listed here on the site for your convenience. We have also written detailed reviews about all of the brokers we recommend so that you can read about them and build your own opinion and find the best-suited option for you so you can get started trading stocks. In our review of the best stock trading brokers, you’ll find all the information you need to know before signing up and depositing money. The brokers are also all regulated and safe to use, and we would never recommend a service that we didn’t feel comfortable using ourselves.
Below you’ll find a list of the best stock brokers on the market and you can either push the link to read our detailed review or go directly to the broker and start trading stocks today.
Bonus tip: All of these brokers offer demo accounts that can be used to trade stocks as CFDs in a risk-free environment before you deposit your own money. Demo accounts are perfect for beginners that want to get a feel of how it is to trade on the platforms offered, as well as for experienced traders looking for new brokers.
Invest in Stocks
If you’d rather invest in stocks in a more traditional way, you first need to find a reliable service to use. Depending on where you live, those services might look different. In some cases, you can contact the exchange directly to see what they recommend but we usually suggest that you contact your bank to see what services they offer. Most leading banks in the Western world offer some form of stock trading.
This type of stock trading is best suited for long-term investments and can be used as a form of savings account. In many cases, people invest in stocks with several year-long goals.
Stock Trading Strategies
Investment strategies for is an incredibly massive subject that we could dedicate several pages too, especially strategies for stock trading. Because of this, we won’t go into any serious details on this page and only provide some useful tips that you should consider. These tips are mostly for beginners.
The first tips are to not invest in stocks or any other security before you have a good understanding of the asset and the related market. By spending some time studying market conditions and patterns, you will greatly improve your chances later on.
When it comes to stock trading we also recommend that you begin by focusing on companies in an industry that you’re already familiar with. If you’re interested in technology, you could invest in Amazon, Apple, or Microsoft. If you’re into fashion and clothing, H&M can be a good option, and if you have an interest in cars we have good news for you, almost every major car company is traded publicly.
Invest in Indices, how does it works?
We’ve already talked about the fact that stocks, or shares, are a part of a company that you invest in and that you can also speculate on the price of a share. But did you know that there is an alternative way of trading stocks?
An index (indices in plural) is the average price of a collection of stocks, and it is an exciting way of investing in the stock market. Most indices are collections of the best-performing stocks on a single exchange. You’ve probably heard about the S&P 500 (Standards and Poor’s) which is an index consisting of the 500 biggest companies in the United States. You might have also heard about the Dow Jones that consists of the 30 best companies in the United States.
There are more indices than that and all of the world’s exchanges have at least one or two options to choose from. In Sweden, the leading index is the OMX30 and it is listed on the Stockholm exchange. In England, the biggest index is called the FTSE and it comes in different sizes, 100, 200, 350, 500, etc. There are also indices based on specific industries such as technology, food, or car companies.
When trading indices you buy a security representing the average price of the index. You can either invest in indices using the recommended brokers above as CFDs or binary options, or you can use another brokerage service offering access to the exchanges.
I Would Like To Start Trading Stocks, How do I?
Trading stocks can be very exciting and rewarding, and it is definitely something we recommend you try. In fact, anyone who is serious about trading should at least give the stock markets a try at some point.
Before you start trading stocks, you need to make a decision about how you want to approach it. You can either trade the stocks with the exchange and buy the actual company share you’re interested in, or you can use an online broker to speculate on the price. The first option is best suited for longer investments and savings while the second option is perfect for anyone looking to day trade.
As a complete beginner, we recommend that you start by opening a demo account with one of the brokers we recommend. By doing so you get the opportunity to trade stocks under real market conditions without any risk.