9 Tips for Learning About Trading

W ondering how to learn about trading? Beginning traders should explore their own goals and investment needs while developing strategies through articles, books, charts, and more. Check out these nine tips for getting started.

Key Takeaways:

  • Learning about trading involves various tasks, from setting personal goals and understanding your own risk tolerance to studying charts, reading books, and more.

How To Learn About Trading

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There’s no one best way to learn to trade. Learning about trading takes commitment and dedication to discover and understand the intricacies of the market and the instruments you can trade.

Fortunately, there are a few surefire things you’ll want to add to your to-do list when you want to get more involved in the trading game. Here are nine tips to get you started.

1. Learn About Stock Categories

Learning about trading involves investigating the different kinds of stock categories as well as the various industry-specific stock sectors.

Stock categories include:

  • International stocks.
  • Large-cap stocks.
  • Mid-cap stocks.
  • Small-cap stocks.

Industry-specific stock sector categories include:

  • Consumer goods.
  • Financial.
  • Manufacturing.
  • Technology.

Once you understand these categories, you’ll have a better grasp of how and where to direct your investments and strategize your trades.

2. Set Your Trading Goals

You’ll want to consider various goals when you set out to learn about trading:

Set Goals for Investing

When you first start learning about trading, you should set up a framework with your own goals in mind. By establishing your goals while you learn about trading, you can integrate relevant strategies.

Your goals will depend on some situational specifics, including:

  • Your age.
  • Your income level.
  • Saving for short-term financial needs, such as:
    • A new baby.
    • A new home.
    • An upcoming wedding.
  • Saving for long-term financial goals and needs, such as:
    • College savings.
    • Paying off a home.
    • Retirement.
    • Starting a business.

Start by setting and prioritizing goals, then establishing a timeframe for reaching different goals. Using that information, you can better select stock investments that suit the needs and goals of your unique situation.

Set a Stable Stock Portfolio Goal

In addition to your personal goals described above, you also want to consider a stable stock portfolio goal for your experience level. Beginning traders often decide to keep things simple as they learn about trading. You can create a stock portfolio when you’re first starting out of around 10 to 20 stocks you’ve researched well.

When you start with a more limited portfolio, you’ll give yourself the time you need to learn about trading and research each stock thoroughly. Necessary research includes looking into relevant risk factors as well as the underlying company financials of each stock.

3. Determine Your Risk Tolerance

Every investor has a comfort level when it comes to risk. You’ll need to assess your own comfort for risk and then focus on investments that best combat whatever it is you’re concerned about. Examples of factors include:

  • Inflation.
  • Liquidity.
  • Taxation.

You’ll want to mix portfolio assets across various stock categories, trying to cover the different types of risk while you do so.

4. Learn the Basics and Expand Your Knowledge

Even once you understand your own goals and needs, you’ll want to make sure you have a knowledge baseline before you dive into making trades. It’s important to have a grasp on stock market basics as you develop your strategies. Common ways people learn about trading include:

  • Online courses: Online courses offer incredible convenience, so it’s no wonder this is a fast-growing method for traders to learn. You can find basic trading on websites for some trading and investment providers; some take things a step forward to offer a full online curriculum. Sometimes, though, these services restrict their online learning options to paying customers. You can also find self-guided courses for free or at different price levels. Independent work lets you learn at your own pace, but you might not be sure if you really understand trading strategies before you start using them in the real world.
  • Trading books: Learning about trading through books is one of the most common methods of learning. You can take your time making sure you understand an author’s philosophy and approach. You can also refer to the text as you need to whenever you want to clarify or refresh points about trading strategy or theory. However, you won’t have a chance to ask follow-up questions. Additionally, as market conditions change, philosophies in older texts may be rendered invalid.
    Books many traders turn to include:

    • ‘The Nature of Risk’ by Justin Mamus.
    • ‘Stock Market Wizards’ by Jack D. Schwager.
    • ‘Technical Analysis of the Financial Markets’ by John Murphy.
    • ‘Trading for a Living’ by Dr. Alexander Elder.
    • ‘Winning on Wall Street’ by Martin Zweig.
  • Trading seminars: Attending in-person sessions allows you to ask presenters questions to clarify your understanding of the strategies that are presented. Live sessions can also discuss ideas related directly to current market conditions, and these sessions allow attendees to collaborate with other new traders. However, trading seminars can get expensive, and unless the session is recorded, you will only have a narrow amount of time to absorb and understand the information presented.
  • Mentoring: You can seek out dedicated instruction and mentorship. One-on-one or small group sessions offer tailored, personalized information that directly targets your needs and questions. You’ll want to look into a potential mentor’s investment track record and results, as well as how successful they are at conveying and teaching strategy. You’ll want to make sure a mentor’s strategy fits in with the approach you’re seeking as well. This is also often one of the most expensive ways to learn to trade.

5. Understand Key Terms About Metrics and Orders

High on your list of things to learn about trading? The terms professional traders use when they’re evaluating stocks. Key terms to learn include:

  • Compound annual growth rate, or CAGR.
  • Price-to-earnings ratio, or P/E ratio.
  • Return on equity, or ROE.

These and other metrics often reveal how a stock works, pointing you to a decision to buy or sell.

You’ll also need to know about different types of stock market orders. Trade executions depend on the kind of order you put in. You need to familiarize yourself with various stock market trade classifications, including:

  • Market orders.
  • Stop limit orders.
  • Trailing stop-loss orders.

Each of these types of orders is treated differently when it comes to trade executions.

6. Learn About Trading Systems and Techniques

No matter the market you want to trade, it’s important to educate yourself about trading strategies that can produce a profit in that market. You’ll need to delve into research and verify what you find. Review charts, and seek out examples of the strategy in the real world. Professional traders who offer books and articles that highlight their methods are a great resource.

Professional traders develop their own unique methods by constantly studying charts to notice patterns and tendencies. They then create a system that exploits these tendencies. Doing this can take months or even years to develop a viable method for consistent profits, so learn from experienced traders where you can.

7. Know Where and How To Buy Stocks

First, you’ll need to choose an investment account. While most investors choose a traditional cash account for trading stocks, other account types exist. For example, you could instead choose a margin account, which would allow you to borrow money in order to purchase stocks (this type of account involves higher risk).

You’ll also find different ways to buy stock. This includes buying stock through a stockbroker or purchasing stock online.

Typically, you pay more in trade execution fees when you purchase shares through a traditional broker. These days, you can also find various options for digital stock trading that allow you to buy stock through online trading platforms; this typically involves lower fees.

8. Practice Trading

Once you’ve read, studied the charts, and set your goals, you should practice what you’ve learned without risking all your cash. Paper trading, or virtual trading, lets you follow market actions in real-time and make decisions to buy and sell.

You’ll find various options for stock market simulators that give you the look and feel of how a real stock exchange would perform. Try out your different strategies and holding periods, then analyze your results and make any necessary tweaks.

9. Follow the Markets

Though this may sound obvious, it’s important enough to emphasize. You want to start following the market each day in your spare time to understand changes and fluctuations and get a sense of how markets are performing.

This doesn’t just apply to markets in the United States. You should also read about any overnight price action on foreign markets to give yourself a broad picture of global trends. Thanks to electronic trading and the growth of derivative instruments that link worldwide bond, equity, and forex markets, traders across the globe are interconnected more than ever.

S ome learning resources require you to commit time and money, while others will let you learn at your own pace. No matter how you choose to learn, you’ll want to develop a trading strategy that incorporates your personal needs and investment goals.

Author:Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

How To Learn Stock Trading for Beginners

There are few better ways for people to grow their wealth than investing in stocks. However, jumping straight into trading stocks without any prior learning is a risky approach that’s likely to result in financial loss. Much like with any other skill, some education about stock trading provides the fundamentals needed to begin practicing the skill and trading as a beginner.

It’s vital that newcomers are aware of the fact that stock prices can move up and down frequently and with little notice. Yet, the increased volatility compared to bonds or money market investments also provides increased opportunity for growth. The basic steps to begin trading are to open an investment account and choose what to invest in. However, some additional steps can provide a better education for beginners and maximize the chances of succeeding at trading stocks.

Key takeaways:

The following steps provide a useful guideline on how to invest in stocks:

  • Take an online course.
  • Read books and blogs.
  • Open an investment account.
  • Understand investment funds.
  • Choose between funds and individual stocks.
  • Establish a budget for trading stocks.
  • Have a long-term mindset.
  • Manage your portfolio.
  • Consider advanced strategies.

Take an Online Course

Online courses taught by successful investors who know what they’re doing can be a great entry point to learn stock market trading. The value of learning from an expert who has created their own course can be difficult to put a price on.

In an online course, new investors can expect to learn about trading terminology, the stock exchange, market behavior, different types of financial instruments, how to make smart trading decisions, and more. Good courses are those taught by experienced trading professionals who are able to show the results that back up their claims. Authentic testimonials and courses with regular content updates are other features to look out for.

The cost of trading courses varies wildly across different providers. A typical introductory trading course normally costs somewhere between $50 and $500.

Read Books and Blogs

Books about investment are excellent resources to help you learn stock trading, and there are tons of books out there on trading strategies. It’s best for beginners to look for books that teach the fundamentals of stock market trading. The basis for reading books should be to gain enough knowledge to build out a personal investment strategy based on the individual’s goals.

Blogs are also incredibly useful resources for learning to trade. Many resources offer free trading tips and more.

Open an Investment Account

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When a beginner becomes armed with enough fundamental trading knowledge from online courses or books, it’s time to open an investment account. An online brokerage account is the easiest path to get started trading stocks. The two main options for online brokerage accounts are to open an Individual Retirement Account (IRA) and set aside money for retirement or to open a standard brokerage account if retirement funds are being set aside elsewhere.

There are many providers of brokerage accounts. It’s wise to shop around and look for the best value in terms of the costs of the account and the available investment choices. The costs typically paid include trading commission and account fees.

Understand Investment Funds

An important decision for beginners to make is to choose whether to invest in funds or individual stocks. When it comes to funds, the two main types are mutual funds and exchange-traded funds (ETFs).

Mutual funds allow investors to purchase a collection of stocks by pooling together money from many investors. These funds are actively managed by professionals who buy and sell fund assets in an attempt to beat the market.

Exchange-traded funds (ETFs) are special types of investment funds that track a specific index, such as the S&P 500. Because ETFs track a stock market index, they are passively managed investment funds.

Mutual funds typically come with higher costs than investing in an ETF. These higher costs reflect the more active role played in managing mutual funds. Some investors want to take on the extra costs because they find the idea of beating the market attractive.

Choose Between Funds and Individual Stocks

Before getting into more complicated investment strategies, the basic choice that people who are learning stock trading face is to choose between funds and individual stocks. People can choose to invest in shares belonging to specific companies. The difficulty with individual stocks is that diversification — spreading investment risk among many different companies — requires significant investment.

Beginners are typically best served by establishing a portfolio comprising mainly mutual funds or ETFs with some money allocated to individual stocks. As investors become more experienced and knowledgeable, they can shift more of their investment budget to individual stocks. The attractive upside of buying individual shares is that choosing the right company at the right time can sometimes lead to huge windfalls resulting from the rapid growth of those companies.

Establish a Budget for Trading Stocks

It’s wise for beginners to have a specific budget allocated to stock market investing. Without a budget, a trader might end up chasing losses in individual stocks and ending up losing track of how much they’ve invested. The precise budget to allocate to stock trading depends on the individual and the type of investment they want to pursue.

Individual stock prices can vary widely from day to day. When it comes to mutual funds, there is typically a minimum purchase price of between $500 and $5,000. Regardless of whether a beginner has a small or large budget, the point is to establish a suitable budget and stick to it by keeping track of their investments.

Have a Long-Term Mindset

One of the most important lessons that beginners need to learn is that stock trading generally requires a long-term mindset. It’s very easy to become bogged down in intricate strategies in an attempt to maximize short-term earnings or mitigate short-term losses. For beginners, these more intricate strategies are difficult to put into practice.

In active trading, the investor should stay aware that successful trading is a long-term game for most people. Advanced strategies can be attempted to maximize short term gains by those who feel passionate enough or knowledgeable enough. Most investors should avoid looking at stocks every day.

Manage Your Portfolio

While relentlessly checking fluctuations in stocks is not the most useful strategy for beginners, it’s important to manage any stock portfolio. The more individual stocks you’ve invested in, the more pressing the need for portfolio management. Investors should check in on their portfolios to ensure their investments are not too dependent on the performance of one sector or industry. Where there is evidence of being exposed to downturns in one sector or industry, investors should diversify and purchase stocks in a different sector.

Consider Advanced Strategies

As beginners become more knowledgeable through experience in trading stocks, they can consider some more advanced strategies to grow their wealth further. The typical advice for beginners is a buy-and-hold strategy by which the majority of a person’s investment budget is put into mutual funds or ETFs with little active portfolio management. A small proportion, say 10%, may be set aside for active trading in individual stocks.

With enough passion and willingness to learn, some investors might want to consider trying to time the market and investing more of their money in individual stocks. Most beginners will not be prepared for a lot of active trading unless they take a specific course taught by an experienced trader.

Closing Thoughts

N ot diving in at the deep end without some type of education is one of the key tenets of learning stock trading. That essential education can come from a good online course or an informative book. Armed with enough knowledge, beginners can then choose a suitable investment strategy that defines how much they’d like to invest in individual stocks versus funds.

Most beginners are best served with a long-term mindset that devotes a small part of their portfolio to individual stock trading. As people gain more knowledge through experience, education, and research, they can consider devoting more money and time to stock trading.

Author:Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

Investing in Nasdaq Penny Stocks

W ith incredibly low stock prices and the potential for huge returns, penny stocks persist as an intriguing investment option. Of course, these stocks come with big risks, too. Nasdaq penny stocks offer the benefit of Nasdaq vetting on these low-priced stocks, making them a good place for aspiring penny stock investors to start.

Key Takeaways:

  • Penny stocks traded on the Nasdaq Stock Exchange offer many of the same benefits and risks of other penny stocks.
  • You can often buy these penny stocks for $5 or less.
  • Because any stocks listed on the Nasdaq are subject to strict requirements, you can make more informed trading decisions.
  • Nasdaq boasts plenty of intriguing penny stocks that can help get you started investing, with companies ranging from health care to education and beyond.

What Are Nasdaq Penny Stocks?

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Penny stocks are typically defined as stocks with a price per share of less than either $5 or $1. While many organizations and exchanges consider stocks that fall below the $5 threshold penny stocks these days, stocks that trade under $1 per share is the traditional penny stock definition. Penny stocks, in general, draw people in with their low price and potential for big returns.

You’ll find various promising stocks listed on the Nasdaq that fit the definition of penny stocks. The Nasdaq listings include stocks that have declined in value that also meet the penny stock definition; in these cases, the stock price is low because the issuing company is approaching insolvency.

While penny stock prices can make big moves at any time, those big jumps in prices often happen after major news announcements. Events that tend to move prices include:

  • Dividend announcements.
  • Earnings releases.
  • Reverse stock splits.
  • Stock splits.
  • Sudden changes in company management or any other news item that directly impacts a company’s business.

Nasdaq Penny Stocks: An Overview

Penny stocks feature a unique dynamic that make them different from higher-priced stocks. When it comes to Nasdaq, most penny stocks you’ll find come from companies that either:

  1. Have recently met Nasdaq’s listing requirements, and subsequently had stock listed at a low price.
  2. Have had stock prices decline due to a decrease in business revenue or another negative event that could hurt the company’s prospects.

In other words, you’ll want to carefully look into the businesses behind any tempting penny stocks before jumping into a trade.

About the Nasdaq Stock Market:

The Nasdaq exchange is divided into three tiers:

  1. Nasdaq Global Select Market.
  2. Nasdaq Global Market.
  3. Nasdaq Capital Market.

Each tier includes an initial listing requirement as well as ongoing listing requirements. Initial listings can come from a company’s initial public offering. Alternately, a company can move from a less prestigious listing service (such as OTC Bulletin Board) onto the Nasdaq listing.

Nasdaq Listing Requirements

To meet listing requirements, a stock must:

  • Have an initial minimum bid of $5.
  • Trade for at least $1 after the initial minimum bid.
  • Have at minimum three market makers for that stock.

What Happens When a Company Fails to Meet the Listing Criteria?

When a company’s stock price declines and the company no longer meets Nasdaq’s listing criteria, the penny stock then typically ends up listed on ‘pink sheets’ for over-the-counter trading. The stock can end up on OTCBB or the OTC Markets Group exchange, known as OTCQB.

Why Look for Nasdaq Penny Stocks?

Many traders shy away from penny stock investments as they are speculative in nature and subject to volatile changes in price. However, some penny stock investments see huge returns, keeping investors interested. If you’re seeking greater volatility, penny stocks can offer an intriguing option. You may see a penny stock fluctuate up or down by more than 100% or even 200% in a short period of time.

The high volatility of penny stocks is also the major advantage of trading them. At the same time, that high volatility creates extra risk that can be unsettling for a conservative investor. On the other hand, penny stocks can’t go below $0 in value, which somewhat limits the risk for each individual share purchased.

The best penny stocks typically have:

  • Substantial daily volume.
  • A liquid market.
  • Earnings that gradually increase to demonstrate a company’s profitability and ability to remain in business.

All in all, penny stock investments can lead to higher returns from less capital invested.

Nasdaq penny stocks attract investors because companies listed on the Nasdaq must meet certain criteria. The companies you’ll find on the Nasdaq often have a good reputation and solid financials and management.

A company must meet Nasdaq’s reporting requirement to remain listed. While investors may not have access to timely reports with penny stocks listed on less prestigious exchanges, Nasdaq requires reports that can make it easier to invest with the information needed to make good decisions. The higher reporting requirements from Nasdaq, as opposed to OTC Bulletin Board and OTC Markets, equips investors to trade penny stocks while still trusting the information they have.

11 Nasdaq Penny Stocks to Watch

Whether you are looking to invest in industries like health care, education, or music, you’ll find all that and more within Nasdaq’s penny stock offerings. Keep in mind that I’m not an adviser, so it’s a good idea to do some of your own research to find penny stocks that work best for you. Here are a few stocks to keep an eye on when you’re searching for potential investments:

  1. Alphatec Holdings (ATEC): This company develops and manufactures products for the treatment of spinal disorders such as stenosis, degenerating discs, and compression fractures. The company has recently turned to a new management team, which could lead to major returns in the future.
  2. Axovant Gene Therapies (AXGT): This company offers innovative gene therapies and aims to change the way patients are treated for neurodegenerative diseases. The company’s lead asset is a potential treatment for Parkinson’s disease, sparking excitement for the potential of successful results with wide-reaching potential.
  3. Capstone Turbine Corporation (CPST): Although this company has seen slow past performance, it is attempting to elevate the micro-turbine industry to new heights, offering intriguing potential for investors.
  4. Daré Bioscience, Inc. (DARE): This company focuses on identifying and then advancing cutting-edge therapies. Their products could offer women both more choices and improved outcomes. Thanks to its share price and strong pipeline, this company has earned praise from Wall Street experts.
  5. Exelixis Inc. (EXEL): This pharmaceutical company is working on developing and producing drugs that treat thyroid cancer.
  6. I.D. Systems, Inc. (IDSY): This company works in wireless technology, collaborating with well-known entities such as the USPS and Walmart to help manage remote warehouse equipment. I.D. Systems recently got a large contract with Avis Budget Group and is working to acquire contracts in industries such as packaging manufacturing, tobacco, and dairy.
  7. IZEA Worldwide Inc. (IZEA): This penny stock is considered an active mover by many. The company both operates and creates online marketplaces that connect marketers and content creators. Agencies and brands can scale their marketing programs thanks to the company influencer marketing and customized content development. They’ve also been in business since 2006.
  8. Lionbridge Technologies, Inc. (LIOX): This company offers a variety of services to help other businesses get established in foreign markets. Services include application testing, marketing, translation, and more.
  9. LiveXLive Media, Inc. (LIVX): This digital media company acquires, distributes, and monetizes various aspects of live music, such as video content and performances. The company has a streaming music service that includes a live social music network, live music events, and original content production.
  10. Rigel Pharmaceuticals, Inc. (RIGL): This pharmaceutical company develops and test drugs for various conditions, including chronic musculoskeletal disorders, eye problems, asthma, and arthritis. A merger with Bristol-Myers Squibb for research has made investors watch this company closely.
  11. Zovio Inc. (ZVO): This company offers post-secondary educational services to help schools move curriculum online. In addition to providing solutions and logistics for educational instructors who are looking to launch online programming, the company offers services to support students through the entirety of the online learning process.

I f you’re interested in jumping into the world of penny stock investing, Nasdaq penny stocks are a good place to start.

Author:Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.