For anyone wishing to learn the basics of how to trade stocks in order to actively speculate in the stock market, we should start with a note of caution, the stock market is a dangerous and costly place for those who venture there without adequate knowledge and an understanding of how to manage financial risk by limiting each individual trading loss that will be encountered, something that happens to every trader, whether experienced or not.
The next thing to know is that it takes a lot of study and research to learn how to trade stocks and that cannot be accomplished in a short time or without real effort, it is fortunate that there are many resources available that can provide a lot of the necessary instruction and training in the subject free of charge.
I am just going to list here some of the things that need to be known before starting to trade in the stock market. Among the sources for the topics listed below are books such as William J. O’Neil’s “How to Make Money in Stocks”, a book that provides a comprehensive introduction to trading together with a proven winning system for trading. I would make this book’s contents the basis of a study program, master it, be ready to put its suggestions and advice into action and you will be well on the way for a successful start.
If you want to be a winner it is not a bad idea to emulate a winner, and O’Neil is a winner. The book sells at about $15 to $20 I believe, and any of the other O’Neil books on investment and trading are worth having. There are a few books by other author’s, some more basic such as those in the “For Dummies” series and quite a few others of similar content, all of which provide a lot of very good wide-ranging information.
At a level above that of the beginner, I would suggest a book such as “Mad Money” by the controversial Jim Cramer. Controversial or not, he fits the “emulate successful traders” category, he has amassed a considerable fortune in trading, that may be beyond the possibilities of the person who is still learning how to trade stocks, nevertheless almost all knowledge about the stock market and the way it works is valuable. And you have to start somewhere.
Some of what you need to know
There is so much to be learned that it is not possible to list it all, and its sources, and make sense of it right here, but a few randomly chosen topics in no particular order would include
- An understanding of the market and its terminology
- The stockbroker’s Trading Platform and its interface
- How to place a trade, an order to buy or sell
- Types of Orders, Market, Limit, Stop
- How to place a stop
- The stop and its value in risk management
- How to obtain a quote
- How to find suitable stocks to trade
- How to determine when to buy
- How to determine when to sell
- Stock charts and chart patterns and chart analysis
- Trading strategies, and types of trading, swing, momentum, earnings, range trading etc.
- Risk management to limit the amount of loss and capture maximum gains, don’t sell too soon but don’t be greedy
- Stock market Trends
- Short selling
- How to build a Watch List
- Virtual trading, sometimes called paper trading
- Mistakes to avoid
- General Market Knowledge, the characters and the lore of the market
For more information on the stock market, check out How to Trade Stocks and Stock Market Basics.
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