Stock trading for Beginners: Where to start

Stock trading for Beginners: Where to start

Topics covered in this article:

We have all been exposed to trading in one form or another – whether that’s through The Wolf of Wall Street or the news. What is often missing from these fleeting encounters is the bread and butter of trading – the information that makes trading possible. What are stocks? How do I trade them and where?

This guide will answer these questions and explain how to find the best broker and get the lowest stock trading commission.

What is a stock and what is the difference between a stock and a share?

A stock (sometimes referred to as equity) represents a fraction of a publicly-listed company. Stocks and shares are the same thing hence the moniker shareholder.

How do I start trading?

To start trading, you will need capital – many platforms allow you to start trading from as little as $20. Next, you may choose to start trading using an investment platform, broker, fund manager or advisor. Many new traders opt for an investment platform or brokerage as the fees are significantly less than a fund manager or advisor. Many platforms also allow you to practice your skills through a demo account before graduating to the real thing.

How do I find the best broker or platform?

Research. It is important to find the right broker for you. For instance, some brokers are FCA-regulated, while others are regulated by overseas authorities. Some brokers might hold your funds in a segregated account which will protect your money in the event the broker goes bankrupt while another broker might not. Many websites can help you compare brokers and platforms to find one that’s perfect for you. Finally, review sites and social forums (like Reddit) will often give a very honest picture of a broker or platform.

What are fees and commission?

A platform, brokerage, fund manager and advisor might charge a fee for its services and this is often a percentage of your money. An overnight fee (sometimes referred to as a rollover fee) is an interest charge when you hold a leveraged position open overnight, while an exit fee (or admin/transfer fee) sometimes applies when you sell your stocks or move them elsewhere. Commission refers to a charge or fee when you open or close a position, though many platforms and brokers offer zero (or 0%) commission. 

When researching brokers and platform, it is best to find one that offers simple and straightforward pricing so you know exactly what to expect. Fees and commission structure can hugely vary so be prepared to do the research. 

Finally, before you start trading, it is encouraged to research and practice using a demo account. Make sure you understand the fundamentals of trading and if you are in doubt seek guidance from a trading school or experienced trader.