Do you want to start trading stocks but are not sure where to start? Then let us help you out. We have years of experience from the trading world and would like to share our knowledge about stock trading with you.
This guide is exactly what it sounds like. It is a basic stock trading guide for dummies where we will offer you all the fundamental knowledge you need to start trading stocks. We will not offer any advanced analytic stock advice or explain complicated stock trading strategies, but instead, we’ll focus on all the basics of stock trading.
If you have never invested in anything and you don’t know how to buy stocks, we suggest you start here. Much of the information contained on this page is not only stock market tips but can be applied to other markets as well. In fact, most parts of this guide can be considered a general guide to investing for dummies.
Keep in mind that we do provide more advanced stock trading tips on several subjects and we will provide links to those guides when needed. You can also use the top navigation menu to find answers to all your questions.
If you’re not here for stock tips or the investing for dummies guide, we suggest you get started with one of our recommended stockbrokers:
How to Start Investing for Dummies
Stock trading is the act of buying and selling stocks in order to make a profit. Just like with any kind of trading, the goal is always to buy low (cheap) and sell high (expensive), but there is much more to it than that. In order to be able to figure out when a price is low and what stocks are about to increase in price, you need to understand the market, and the first step to understanding the market is learning basic share tips.
Before we can continue it is important that you have a basic understanding of what stocks are and how you trade them, so to help you with that we will offer you our best share tips and advice.
Stocks for Dummies
Stocks, also called shares or equity, are parts of a company that are sold to private investors. When you buy a stock from a company you own a small percentage of equity in that company. The invested money goes into the company and it can be used for its daily operations, but generally speaking, the invested stock money is used to evaluate the company’s worth.
In exchange for your money, you get to own an actual part of a company and you will be given the opportunity to vote on matters related to how the company is run. Certain stocks give you more voting power than others.
Stocks are also securities or financial instruments that represent some type of value. Trading securities is different from most speculative investments but we’ll explain that in a little bit.
The key idea is that the value of the shares you bought will increase so that you can sell it for a profit in the future. Unfortunately, this is not always the case which also happens to be the reason why stock trading can be so difficult. No company in the world ever only experiences gains and all stocks will eventually decrease in value, at least for some time. That means that you have to be prepared to update your portfolio and switch out your old stocks to new possibilities.
Even though shareholders own a part of the companies they invest in, they are normally not entitled to any form of regular payment for their shares. Some companies pay what’s called dividends which means parts of the company’s profit is distributed among shareholders four times a year. However, there is never a guarantee that you’ll receive dividends and they should be considered a bonus.
Let us recap the most important stock tips. A stock is a part of a company that can be purchased by anyone. If you buy a stock you own shares in that company and your invested money will mirror the performance of the business. If the company does well your stock will increase in value and that’s when you sell it to make a profit. However, the stock can also decrease in value resulting in you losing money.
By buying and selling stocks, you have an influence on the specific company but also the economy where the stock is listed. In fact, just like the foreign exchange market controls our currencies, the stock market helps control and keep our economic systems stable.
Stock Market for Dummies: Stock Market Basics
The stock market is were stocks are traded and where you will make your stock investments. Although, a stock market is not a definite thing and there are many different stock markets in the world. To make it more confusing stock markets change and the lines that define them are not clear since one stock can be a part of several stock markets.
Each stock market is made up of multiple stock exchanges where the actual stocks are listed. Exchanges are in charge of listing stocks in private companies and helping to put private investors in contact with the stock market. An exchange is a marketplace where stock trading takes place.
The New York Stock Exchange (NYSE) is the largest stock exchange in the world based on volume. That means that no other stock exchange has companies worth more money listed on them. The NYSE is located in Manhattan in New York City and is what a majority of people think about when they talk about Wall Street. Some of the world’s most influential companies are listed on the NYSE, for example, Berkshire Hathaway, Walmart, and IBM.
Stock Market Basics: Share Trading Tips and Tricks
It can feel overwhelming when you first need to decide which stock market to trade on but don’t worry. By following these easy stock market tips you can quickly find a market that will suit your needs. The most fundamental stock tips we have for new traders is to either focus on a market they know, for example, the stock exchange in a specific country they have ties to, or focus on one of the major exchanges; NYSE, Nasdaq, the London Exchange, etc.
We have the same share trading tips for deciding on what stock to buy, focus on companies you already know and have a relationship with.
Stock Trading for Beginners: How to Invest in The Stock Market
We just explained what a stock is and offered some well-needed share market tips. If you feel like you need more information and more stock investing tips, we suggest you check out our other guides. Otherwise, you can continue with this page where we will explain how to trade stocks and what’s needed to invest in shares. In order to explain this, we will have to focus on two different trading styles.
CFD Stock Tips
CFD trading is a speculative form of investment where you don’t buy the actual underlying asset but bet on the market price and future movements instead. CFDs are securities but when you use them to invest in stocks you never buy the actual stock and your security is a contract representing the stock price. This type of stock trading is very different from regular stock investments, although not necessarily bad even though it has somewhat of a negative reputation among certain traders. The truth is that CFDs are not a scam and were in fact invented by serious stockbrokers on the LSE and NYSE that wanted to give themselves tax breaks.
Let us offer some CFD stock tips to further explain.
CFDs were created in a way that makes them easy to understand as well as good for shorter trades. Your job is to estimate in what direction the stock will move and buy a CFD representing that direction. This also means that CFDs are designed to allow for investments against market movements – short trades.
One of the main advantages of CFD trading is that you can use them to invest in several different markets using the same techniques and brokers.
Regular Trading: Stock Tips
Regular stock investment is the term we use to describe trading stocks the traditional way on stock exchanges, the way we described stock trading above. Even though a lot of people have started using CFDs for their stock trading lately, traditional stock trading is still the most popular and common form.
What really sets CFD trading and regular stock trading apart is that you buy the actual stock instead of speculating on the market price. Some people day trade stocks this way but the majority of investors that buy stocks do so with long-term goals, meaning they hope their investment will grow over several years. It is considered safer to invest long-term than to day trade, and it does not require as much dedication even though a good understanding of the market is essential.
Whether you decide to use CFDs to trade stocks or you would like to buy the stocks the traditional way from the exchanges is up to you. If you’re really into trading we would recommend that you try both, that’s what we do and it offers plenty of great advantages.
Note that stocks can also be purchased as exchange-traded funds (ETFs), indices, and more. These securities are created by combining several stocks under one price, and you can read more about it in our stock trading guide.
Investing for Dummies: Stockbrokers
We hope you’ve gained some useful share tips and that you’re starting to feel ready to invest in stocks because now it’s time for us to take a look at the best stockbrokers.
A stockbroker is a service or person that you will use to buy stocks. They come in different shapes and offer different features depending on your needs. It can be a traditional stockbroker that acts as the middleman between you and the exchange, or a CFD broker that issues sales contracts, or a banker working for your local bank.
We suggest you contact your bank if you want to start trading stocks the traditional way. Most banks offer stock trading services and would be happy to help you. If not, they most likely know of legitimate services and stockbrokers that they can recommend.
CFD stockbrokers are very different. All CFD brokers are 100% internet based meaning they don’t have physical offices to visit them at like many regular brokers. Many of them are also 100% digital which means they provide customers with customer support via email or live chat.
We have created a detailed guide about stockbrokers and we recommend you read through it before you decide on which broker to use. Otherwise, you run the risk of registering with a broker you don’t like or that will end up ripping you off.
Stock Recommendations and Stockbroker Tips
Below is a list of our top three favorite stockbrokers with a short description of their best features and why we think you should try them.
- Markets.com has developed a stock trading product that few services will ever be able to compete with. We have used them for years for trading stocks, cryptocurrencies, forex, and much more. As a bonus, they use the MetaTrader 4 platform and provide trading guides that are similar to this stock investing for dummies page.
- IQ Option recently did a full 180 when they decided to update their binary options product to also include CFDs. Today, they offer hundreds of stocks on their world-renowned platform with amazing stock tips, analytic guides, and comprehensive stock trading strategies. Moreover, IQ Option has a great selection of other underlying assets as well as a brand new cryptocurrency wallet.
- Plus500 is one of the few publicly traded stockbrokers in the world which is the ultimate testament to how reliable they are. The company is based in Israel but listed on the London Exchange. Plus500’s stock trading platform is one of the best in the world and they provide users with extremely valuable share tips and stock advice.
Stock Trading Risks and How To Avoid Them
Since this guide about stock trading for dummies, we feel the need to share some of the risks involved in stock trading. You might already be aware that all forms of trading are associated with high risk, it doesn’t matter if your investing in stocks and indices or if you’re buying binary options. Whenever you invest money, you run the risk of losing it.
Minimize Risk With Simple Stock Strategies
The most obvious risk is investing in a bad stock and losing your money when it drops in value. Another one is investing in the “wrong” stock and witnessing the rest of the industry soar while your stock stays at the same level. The third and in some ways most dangerous risk is to register with an unreliable broker, which is why we recommend you only use regulated brokers and that you pick one from our list. We also suggest that you read through the in-depth review we’ve written for every broker we list on this website.
No one can avoid all risks and be completely safe but by educating yourself and listening to our stock market tips you can minimize the risk. Another way of protecting yourself is by only investing money you can afford to lose and to start small. Never invest money that was intended for something more important such as rent, food, or insurance.
Stock Trading for Dummies Summary
When you invest in a stock you invest in a company and your goal is to find companies that are performing well and that will keep growing, both in terms of revenue but also in stock value. There are different ways you can invest in the stock market depending on what type of investment you’re looking for and if you have long-term goals or are planning to day trade.
Traditional trading is when you buy stocks from the exchange in the form of stocks, indices, ETFs, etc. An alternative way of investing in stocks is by speculating on market movements using so-called Contract for Difference (CFD).
Whichever way you choose to invest in stocks it is important that you study the market and how it works. Please do yourself a favor and wait with investing until you actually know what you’re getting into. Learning how to trade stocks is not as hard as you might think and by reading our guides and studying our stock tips you will be well on your way.