10 Great Ways to Learn Stock Trading in 2022
Beginners taking their first steps toward learning the basics of stock trading should have access to multiple sources of quality education. It's like learning to ride a bike: Trial and error, coupled with the ability to keep pressing forth, will eventually lead to success.
One great advantage of stock trading lies in the fact that the game itself lasts a lifetime. Investors have years to develop and hone their skills, and strategies used 20 years ago are still utilized today.See also: How to Invest (2022 Beginners Guide)
When I made my first stock trade and purchased shares of stock, I was only 14 years old. Over a thousand stock trades later, I'm still learning new lessons.
What is stock trading?
First things first: Let's quickly define stock trading. Stock trading is buying and selling shares of publicly traded companies. Popular stocks most Americans know include Apple (AAPL), Facebook (FB), Disney (DIS), Microsoft (MSFT), Amazon (AMZN), Google (GOOGL), Netflix (NFLX), and more recently listed companies such as Uber (UBER) and Pinterest (PINS).
In the stock market, for every buyer, there is a seller. When you buy 100 shares of stock, someone is selling 100 shares to you. Similarly, when you go to sell your shares of stock, someone has to buy them. If there are more buyers than sellers (demand), then the stock price will go up. Conversely, if there are more sellers than buyers (too much supply), the price will fall.
10 great ways to learn stock trading as a beginner
For beginners who want to learn how to trade stocks, here are 10 great answers to the simple question "How do I get started?"
1. Open a stockbroker account
To trade stocks, you need an online broker. Every broker offers something different. For a list of recommendations, read my full guide to the best online stock brokers for 2022. Some brokers are known for their trading platform and tools, others provide excellent research, and some provide a bare-bones experience but are simple to use. Do some investigating to see which will suit you best.
2. Read books
Books provide a wealth of information and are inexpensive compared to the costs of classes, seminars, and educational DVDs sold across the web. See my list of 20 great stock trading books to get started. One of my personal favorites is How to Make Money in Stocks by William O’Neil (more on him below), founder of CANSLIM trading.
3. Read articles
Articles are a fantastic resource for education. The arena of educational websites has grown in recent years with contenders like Investopedia. I also highly recommend reading the memos of billionaire Howard Marks (Oaktree Capital), which are absolutely terrific. And, of course, searching on Google is another great way to find educational material to read.
4. Find a mentor or a friend to learn with
A mentor could be a family member, a friend, a co-worker, a past or current professor, or any individual with a fundamental understanding of the stock market. A good mentor is willing to answer questions, provide help, recommend useful resources, and keep spirits up when the market gets tough. All successful investors of the past and present had mentors during their early days.
Despite being "old school," online forums are still used today and they can be a great place to get questions answered. Two recommendations include Elite Trader and Trade2Win. Just be careful who you listen to. The vast majority of participants are not professional traders, let alone profitable traders. Heed advice from forums with a heavy dose of salt and do not, under any circumstance, follow trade recommendations.
5. Study successful investors
Learning about great investors from the past provides perspective, inspiration, and appreciation for the game that is the stock market. Greats include Warren Buffett (below), Jesse Livermore, George Soros, Benjamin Graham, Peter Lynch, John Templeton and Paul Tudor Jones, among others. One of my favorite book series is the "Market Wizards" by Jack Schwager.
6. Read and casually follow the stock market
News sites such as CNBC and MarketWatch serve as a great resource for beginners. For in-depth coverage, you can't beat the Wall Street Journal and Bloomberg. By casually checking in on the stock market each day and reading headline stories, you will expose yourself to economic trends, third-party analysis, and general investing lingo. Pulling stock quotes on sites like Yahoo Finance to view a stock chart, view news headlines, and check fundamental data can also serve as another quality source of exposure.
TV is another way to get familiar with the stock market, with CNBC unquestionably the most popular channel. Even switching it on for 15 minutes a day will broaden your knowledge base. Don't let the lingo or the style of news intimidate you; just watch and allow the commentators, interviews, and discussions to soak in. Beware, though: Over time you may find that a lot of the investing shows on TV are more of a distraction and source of excitement than actually useful. Recommendations rarely yield profitable trades.
7. Carefully consider paid subscriptions
Paying for research and trade ideas can be educational. Some investors may find watching or observing market professionals to be more beneficial than trying to apply newly learned lessons themselves. There are a variety of paid subscription sites available across the web; the key is to find the right one for you. Two of the most well-respected subscription services are Investor's Business Daily and Morningstar.
Caution: Many paid subscriptions, especially those promoted on YouTube, Twitter, and so on, come from individual traders who claim to have fantastic returns and say they can teach you how to be successful too. 99.99% of them are scams. Most testimonials are fake or come from subscribers who got lucky and made money (for each profitable subscriber, there are many more who lose their cash). Remember, the suckers who buy are the ones who pay for the self-described experts' advertising, sports cars, and other fancy baubles. See: 10 Reasons Why I Quit Day Trading.
8. Cautiously explore seminars, online courses, or live classes
Seminars and classes can provide valuable insight into the overall market and specific investment types. Most seminars will focus on one specific aspect of the market and how the speaker has found success utilizing personal strategies over the years. Credible examples include Will O'Neil workshops, Dan Zanger and Mark Minervini, which I have attended.
Not all seminars come with a cost. Some seminars are offered for free, which can be a beneficial experience — just be conscious of the sales pitch that will almost certainly come at the end. Whatever is offered, just say no!
Caution: As with paid subscriptions, be very careful with classes and courses. Many run over $1,000 and are sold with promises that you'll acquire valuable knowledge. Their fantastic sales funnels will suck you in, take your money, excite you during the course, then leave you with a strategy that was either never profitable, or profitable many years ago. See: Why Day Trading Is a Loser's Game.
9. Buy your first shares of stock or practice trading through a simulator
With your online broker account set up, the next step is to take the plunge and place your first stock trade (instructions below!). Don't be afraid to start small. Trading even 1, 10, or 20 shares will serve its educational purpose.
If the thought of trading stocks with your hard-earned money is too nerve-racking, consider using a stock simulator for virtual trading, also called paper trading. Online brokers TD Ameritrade, E*TRADE and Interactive Brokers offer virtual trading to practice buying and selling stocks.
Caution: One of the most common mistakes new investors make is to buy too many shares for that first stock trade. Avoid the temptation to take excessive risk. Instead, begin with trading small position sizes, then slowly work your way up to buying more shares, on average, each trade.
10. Follow Warren Buffett's advice: Buy and hold the market
For most people, online trading (especially day trading) will not outperform simply buying the entire market, such as the S&P 500, and holding it for many years. Warren Buffett, the greatest investor of all time, recommends individual investors keep it simple: passively invest (buy and hold) instead of trying to beat the market trading stocks on their own. See: how to invest.
What is the stock market?
The stock market is built around the simple concept of connecting buyers and sellers who wish to trade shares of publicly traded companies. It is a marketplace.
Each publicly traded company lists its shares on a stock exchange. The two largest exchanges in the world are the New York Stock Exchange (NYSE) and the NASDAQ; both are based in the United States (Wikipedia). Attempting to grasp just how large the NYSE and NASDAQ are is certainly not easy. The NYSE has a market cap of $26 trillion and the NASDAQ's is nearly $20 trillion. And no, that is not a typo — trillion.
Let's take Apple (AAPL), for example, which is listed on the NASDAQ stock exchange. Apple currently has 16.32 billion shares outstanding, of which 16.3 billion are available to be traded (also known as the "float"). Using the current price of about $168 per share (February 2022), Apple has a market cap of $2.81 trillion. That's a big company! (By the way, market cap is a simple way to gauge the value of a company. If you bought every available share of stock, the market cap is how much it would cost you to buy the entire company.)
Another example: Uber (UBER) went public in May 2019, listing its shares on the NYSE. Currently, UBER's stock trades for about $35 per share and the company boasts a market cap of $73 billion — though that's a drop from its highest point.
Once a company has its shares listed on an exchange, anyone, including you and me, can use an online broker account to trade shares. Whether you are an everyday investor or an institutional hedge fund managing hundreds of millions of dollars in client money, anyone can trade.
Which stock trading site is best for beginners?
TD Ameritrade is the best site for stock trading if you are a beginner. Not only is the TD Ameritrade website user-friendly, but there is also a vast selection of educational materials and courses with progress tracking to accelerate your learning.
Can you become rich by trading stocks?
Yes, but there is no shortcut to accumulating wealth. Trading stocks involves risk. All in all, the wealthiest investors have succeeded by investing over a long period of time — years or even decades. Successful investors avoid risky, short-term trading strategies like day trading.
Can you learn trading by yourself?
Yes. While mentors can help, you don't have to have a teacher to learn how to trade stocks. The best way to learn trading on a budget is to read books, invest with a small amount of money to start, and take advantage of free educational materials that the best beginner trading platforms provide.
There are many strategies for trading stocks. The most common strategy is to buy and hold. You buy shares of stock, then hold them for years and years. The complete opposite strategy would be day trading, which is when you buy shares then sell them the same day before the market closes.
Each strategy has its advantages and disadvantages. For example, day trading can be expensive since you are trading frequently. Furthermore, since your trades are less than a year in duration, any profits are subject to short-term capital gains taxes.
To keep costs as low as possible, famous investors like John Bogle and Warren Buffett recommend buying and holding the entire stock market. Known as passive investing, it is a buy-and-hold strategy where you buy an entire market index, typically the S&P 500, as a single mutual fund or exchange-traded fund (ETF). By buying an entire index, you are properly diversified (you have shares in hundreds of large companies, not just one), which reduces your risk long term. In fact, John Bogle is credited with creating the first index fund.
Three other common strategies you may hear traders refer to:
- Momentum trading: buying shares of very fast-growing companies and selling them for a profit before they inevitably peak in price.
- Swing trading: using technical analysis to identify a trading range, then buying and selling shares as the stock trades within that range.
- Penny stock trading: buying shares of very small companies whose stocks trade for less than $1 a share.
ETFs and mutual funds
By this point, you know what a stock is, so let's break down ETFs and mutual funds. ETFs (exchange-traded funds) and mutual funds are similar in that they both represent a collection, or "basket," of individual stocks or bonds.
Take, for example, the S&P 500 market index, which is composed of 500 companies. Buying shares in 500 different companies (a few of whom offer more than one class of shares, bringing the total stocks to 505) would be very difficult to do. Thanks to mutual funds and ETFs, we can simply buy a single security that holds shares in all 500 companies. The largest S&P 500 mutual fund is the Vanguard 500 Index Fund Admiral Shares (VFIAX) and the largest S&P 500 ETF is the State Street Global Advisors SPDR S&P 500 ETF (SPY).
By buying an ETF or mutual fund, your portfolio is better diversified than if you owned shares of just one or two stocks; thus, you are taking on less risk overall. This is the primary advantage of buying ETFs and mutual funds over trading individual shares.
The main difference between ETFs and mutual funds is in how they trade. ETFs trade like stocks, which means you can buy and sell them throughout the day and they fluctuate in price depending on supply and demand. Mutual funds, on the other hand, are priced each day after the market closes, so everyone pays the same price. Also, mutual funds typically require a higher minimum investment than ETFs.
How do beginners trade stocks?
To trade stocks, you must first open an online brokerage account and make a deposit. Beginners may start with buying individual shares or an exchange-traded fund, or ETF. ETFs give investors broad, diversified exposure to the stock market, instead of investing in a single company where the risk is concentrated in one stock.
For example, you can buy shares of the Vanguard S&P 500 ETF, ticker symbol VOO, representing the 500 largest U.S. companies. In addition, some brokers support fractional share trading for beginners, so even if you don’t have enough to buy a full share, you can buy a portion that fits your investing budget.
Once you open and fund your online brokerage account, the process of placing a stock trade can be broken down into five simple steps:
- Choose whether to buy or sell.
- Insert quantity.
- Insert symbol.
- Choose order type.
- Review order, place trade.
1. Choose buy or sell
The first step is always to choose what we would like to do: buy shares long or sell shares short. As a new investor, keep it simple — buy shares long!
2. Insert quantity
Next we enter how many shares we would like to buy or sell in total. To calculate how many shares we can afford, simply take the total amount of cash currently in the account and divide it by the stock’s last price. So if stock XYZ is trading at $10 and we have $1,000 in our account, we can afford to purchase 100 shares of stock ($1000 / $10).
3. Insert symbol
The ticker symbol represents the company we are going to trade — sort of a nickname. For example, Disney has a ticker symbol of "DIS," Apple is "AAPL," and Facebook is "FB." If you're not sure of a company’s symbol, you can click on the Symbol field on your preferred stock charting site and search to find it, or simply do a Google search for the company name plus "ticker." Tickers are also required to read a stock chart.
4. Choose order type
The most common order types are market, limit, and stop (see my guide, Best Order Types for Stock Trading). Market orders buy or sell immediately at the current best market price. Limit orders only buy or sell these shares at, "$X price or better". Lastly, stop-loss orders are combined with a market or limit to trigger once $X price hits. For investors just getting started, I always suggest sticking with market orders.
5. Review order and place trade
After the basic inputs have been made, the “Place Trade” button will appear to complete the order. By default, a summary screen appears once this button is clicked to summarize the order and confirm there are enough funds in the account. Once investors have experience and are comfortable with the trade ticket, this confirmation page can be disabled.
Here's an example of a TD Ameritrade order ticket filled out.
Other fields (expiration, special instructions, routing)
New investors should ignore these fields and leave them set to their default values. These options give investors more control as to how long certain orders should remain active and how they should be filled. For example, "GTC" for expiration means "good-till-cancelled."
Regarding routing, 99.9% of orders are routed using the online broker's automated system. However, day traders will sometimes hand-select (direct route) their orders to a specific market center to receive market rebates. See this guide to routing on our sister site, StockBrokers.com, for more on order routing.
Tips for success
It's always smart to learn from the greats. Here's a variety of stock trading tips from some very successful investors. By applying any of the following lessons, you can become a better trader. Success takes time, and these rules will lead you in the right direction.
William O'Neil is the founder of CANSLIM investing, Investors Business Daily, and has authored numerous books on investing, with his most famous being "How to Make Money in Stocks: A Winning System in Good Times and Bad".
- As a new investor, be prepared to take some small losses.
- Persistence is key when learning to invest. Don’t get discouraged.
- Learning to invest doesn’t happen overnight. It takes time and effort to become successful at it.
- As a beginner, set up a cash account, not a margin account.
- Concentrate on a few, high-quality stocks. There’s no need to own 20 or more stocks.
- Don’t get emotionally involved with your stocks. Follow a set of buying and selling rules, and don’t let your emotions change your mind.
- Don’t buy a stock under $15 a share. The best companies that are leaders in their fields simply do not come at $5 or $10 per share.
- Learning from the best stock market winners can guide you to tomorrow’s leaders.
- Always do a post-analysis of your stock market trades so that you can learn from your successes and mistakes.
- Stocks never go up by accident. There must be large buying, typically from big investors such as mutual funds and pension funds.
- Replace the old adage “buy low and sell high” with “buy high and sell a lot higher.”
- History always repeats itself in the stock market.
- Ignore personal opinions about the market.
- Three out of four stocks, regardless of how “good," will eventually follow the trend of the overall market.
- When starting to invest, keep it simple.
- Short stocks only in a bear market. Use tight stop losses and take profits often.
Jesse Livermore, respected as one of the greatest investors of all time, has been featured in many investment books. The most iconic was "Reminiscences of a Stock Operator" by Edwin Lefevre in 1923. During the course of his life he made and lost millions, going broke several times before committing suicide in 1940. These are his seven greatest trading lessons:
- Cut your losses quickly.
- Confirm your judgments before going all in.
- Watch leading stocks for the best action.
- Let profits ride until price action dictates otherwise.
- Buy all-time new highs.
- Use pivot points to determine trends.
- Control your emotions.
John Paulson, a hedge fund manager in New York, led his firm to make $20 billion in profits between 2007 and early 2009. By betting heavily against first the housing market and then later financial stocks, his firm made a killing. Paulson's success netted him a paycheck of some $4 billion, or more than $10 million a day. His funds during this time had returns of several hundred percent. These are his eight investing lessons:
- Don't rely on experts; be skeptical.
- Always have an exit strategy.
- Debt markets can do a better job predicting problems than stock markets.
- Always educate yourself on new investment vehicles.
- Don't underestimate insurance (such as put options).
- Experience counts.
- Don't fall in love with any single investment; keep emotions aside.
- Don't risk too much on any single trade; diversify risk.
My three favorite stock tips
After completing more than a thousand stock trades, representing over 4,000 individual buys and sells, here are three tips I wish I'd known and fully appreciated on Day One:
- Think win/win. Psychology is a huge aspect of trading. If you have a big winner on your hands and aren't sure whether you should hold the shares to try for higher prices or sell them to lock in a profit, consider selling half and holding the rest with a stop loss (at worst) back at your original buy price. That way, if the stock drops back to your buy price, you still win because you sold half and made a profit. Similarly, if the stock shoots higher in price, you also win because you still hold half your original position. Heads you win, tails you win too. :)
- Set strict rules to help you stay disciplined.
- Always know the day and time (pre or post hours) when your stock holdings are posting earnings next!
Something that I always emphasize to new stock traders is that investing is a lifelong game. Take your time! There is no reason to rush into the stock market.
Start with a small amount to invest, keep it simple, and learn from every trade you make. If you find yourself emotionally charged with trading, then passively investing in the overall market with a simple index fund (see "Trading strategies" above) is likely a better choice.
I hope this helps answer some of your questions about stock trading.
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About the Author
Blain Reinkensmeyer As Head of Research, Blain Reinkensmeyer has 18 years of trading experience with over 1,000 trades placed during that time. Referenced as a leading expert on the US online brokerage industry, Blain has been quoted in The New York Times, Forbes, and the Chicago Tribune, among others.