Many people ask me what they can read up on to get a better idea of how stocks work as well as some good money making strategies. While written material is good for your overall knowledge there is no greater learning tool for you besides actually trading. It’s like someone losing weight. I can read a ton of books on how to lose weight but until I get off my ass and start exercising, I will not make any progress.
Just like any skill in life we need to practice to get better at it. Luckily there’s tool called a paper trading that lets you do just that. A paper account allows you to trade with fake money but it acts as a simulation to the real thing. Stock prices will move just as they do in the market and you can place trades as if it were all real. This allows you to test strategies, make mistakes, and get a feel for the trading platform, all without putting any money on the line. You can look online for these accounts and download them right away to begin practicing. Often the brokerage firm you decide to trade with will have paper trading available. The paper trading account will have a small tutorial in the beginning that shows you the basics of the platform and how everything works. Here’s a couple you can check out.
Opening a Brokerage Account:
Now that you have the basics of trading down, it’s time to find a brokerage firm so that you can open an account and start to get a feel for their software. There are tons of brokerage firms out there and none of them should require you to keep a minimum balance. All of their trading platforms will be different; some more advanced than others. The biggest thing you want to be aware of is fees and commissions. Whenever you place a trade to buy or sell stock you will be charged commission for doing so. If you place a great deal of trades these costs can quickly add up so it’s keen to be aware of how much you will be paying for each trade. These are the most common discount brokers that people use to trade stocks:
- Charles Schwab
- TD Ameritrade
- Interactive Brokers
Which would I go with? To be honest with you I don’t think it really matters. They are all pretty much the same. Commissions may be a dollar difference and TDs trading platform is the most advanced. I like Charles Schwab but I’m a little biased since I worked there and learned everything about their trading platform. But I would also recommend Interactive Brokers if you think you will be placing many trades. Their commissions are some of the cheapest you will find.
Do some research about each firm and evaluate each one in terms of how much you will be paying in commissions and also the quality of their trading platform. Whenever you decide which firm to go with and install their trading platform, you will be overwhelmed with how many tools are at your disposal. Often these firms have teams that will walk you through the platform and show you all the necessary bells and whistles to help you trade. Keep in mind you don’t have to learn everything at once! Slowly integrating yourself with the tools is best.
You can open an account in person at a local branch or online; you just have to be 18 to apply. The account can be opened almost instantaneously and after you will be prompted with how you would like to fund the account. You will have the options to send in a check, wire funds, or transfer funds over via ACH transfer. Select which method is easiest for you. As I said before there should be no minimum deposit that you have to make. Once the funds are cleared into the account you can begin trading! It’s really as simple as that.
Biggest Piece of Advice
I advise paper trading until you find a strategy or system that you become profitable in. Would you rather make mistakes with fake money or real money?? I am going to be teaching you some money making strategies as we continue the blog but for now it’s good just get some experience in on your own. Keep in mind one of the things that paper trading cannot simulate is emotion. You will find that this makes a big difference when you begin trading your own money.
“Practice does not make perfect. Only perfect practice makes perfect.”-Vince Lombardi
Homework: Use one of the links I provided or search to find a paper trading account that you can open. Explore the different firms as well. Their websites will tell you everything you need to know. Start to learn the trading platform and play around with some trades using fake money.