Congratulations on your decision to invest a few minutes of your day into broading your knowledge and eventually your wallet! For many, the stock market is intimidating and often associated gambling or lost fortunes. It would be entirely wrong to deny that there are people who treat stocks like lottery tickets or ignorantly throw their money at random stocks. Fortunately, with just a little bit of learning and discipline, you will be far ahead of those who fail. It's time to watch your capital grow!
What Type of Trader Are You?
Before you get started with your trading business (yes it is a business and cannot be treated like a hobby...if you are here to learn how to make the stock market a hobby just donate your money to a charity instead), you need to assess what type of trader you are. Consider an elephant hunter versus a rabbit hunter; one has a large target worth a large value while another has many small targets that add up in value. Both will use entirely different weapons to go about their business. The same is true for traders who seek single large trades versus those who pursue many smaller (day) trades. For each style a different setup is required.
Picking an Online Brokerage
Once you have decided how you would like to setup up your trading business and have a clear visualization of how you expect to be trading it is time to choose and configure your weaponry! Long gone are the days of calling up your broker to place orders. Thanks to technology, we now have many different options when it comes to trading online.
ETrade is a popular "discount" brokerage among many traders that offers many free services such as streaming market data as well premium services like E*Trade Pro, their desktop trading platform.
ETrade has a user-friendly interface that allows easy deposits and withdrawals of money. The mobile trading platform is also easy to use (cellphone trading, however, isn't a great idea for obvious reasons). The minimum deposit to open an account is only $500.00 USD which makes it easy for those with small accounts to get started.
Although being a popular online brokerage, this is largely due to the ETrade bulletin boards and advertisements plastered everywhere! The company spends lots of time and money promoting their product instead of focusing on development and getting rid of bugs in the software. Likewise the "user-friendly" interface can become a real headache when seamingly simple tasks become impossible to execute. Another important downfall of using ETrade is that short selling stocks is almost impossible as the brokerage never seems to have shares available for borrowing.
A very functional brokerage for basic or longterm trades. Not the best for active trading.
Another popular "discount" brokerage that offers many free feauture-rich tools. Like ETrade, Ameritrade has an extremely intuitive easy to use interface. Also included for free with your account is access to their award-winning Think or Swim platform and Trade Architect (dummy version of Think or Swim).
TD Ameritrade has awesome customer service and a rock solid trading platform. For those with small accounts (minimum deposit also $500.00) nothing beats TD Ameritrade for realiability and service. The Think or Swim platform may be overwhelming at first, but it is an incredibly powerful tool for analyzing and making trades.
Short selling stocks! Yes, it is possible to short stocks with TD Ameritrade...however it isn't as easy as just borrowing the shares whenever you feel like it. If you plan on short selling a stock during the trading day, you will have to call in before hand and manually request to reserve some shares to short.
TD Ameritrade is a powerful and realiable online brokerage for small accounts. Especially suitable for those who do not wish to sell short, this brokerage also has a reputation for handing out lots of freebies such as referall bonuses as well as free trades!
Rated #1 by Barron's 2013 best online brokerage two years in a row, Interactive Brokers (IB) is the professional's choice for trading. Although the minimum deposit to open an account is at least $10,000 USD, anyone requiring what this brokerage has to offer shouldn't have a problem coming up with the money.
BEST security for online trading. Not only does the web & trading platform maintain a higher standard than other online brokerages when it comes to creating user names and passwords, but an encrypted security code is also required until an actual physical security device is shipped (free of charge) to new account owners. IB also boasts an impressive trading workstation that, while being user-friendly, is fully customizable and provides an array of no-nonsense tools for trading. Perhaps the best feature of IB is that they seemingly ALWAYS have shares avaialable to short! Why wait for stocks to go up when they crash 4x faster?
Really, the only thing one could argue is that the extra security makes it "slightly" more time consuming to login to your account...but who can argue against keeping their hard earned capital safe?
Interactive Brokers is the go-to for serious active traders. 'Nuff said.
By now you should have a good idea of which brokerage is right for you and are ready to get started with setting up your account. Keep in mind there are many more brokerages available that may be more or less suitable for you depending on your own individual trading goals. The next step is to sign up, fund your account, and continue learning.
When you are set up and ready to start trading, it is highly recommended to keep a "trading diary" to keep track of your performance. No trader comes out on top of every trade, but by keeping a detailed log of your trades, you will become a better trader after every trade.
Always continue to challenge yourself and move forward!