Where Do I Start?

The hardest part about stock trading might be figuring out where to start. What is stock trading? What stocks are good or bad? What stock broker do I sign up with? What kind of stock trader am I? These are all questions that are going to be answered during your time on Bells and Whistles. Welcome aboard!

"In the world of business, the people who are most successful are those who are doing what they love." -Warren Buffett

What is a Stock?

A stock is a often defined as a share of ownership of a company. Although this is partially true, stocks are better defined as shares of the value of a company which can be bought, sold, or traded as an investment. Any holder of a stock, called a stockholder, is entitled to a portion of the company's profits and the ability to sell shares to somebody else. Essentially, a stockholder owns a percentage of a company's shares, and more importantly, a percentage of its assets and earnings. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets.

It is important to note than not all companies issue shares of stocks. Public corporations are able to issue shares of stocks and often do so to spread out their risk and raise capital in hopes of expanding. However, private companies are not publicly owned or traded, and therefore, cannot issue shares of ownership to the public. When a small business or private company decide to "go public" this means that they are becoming publicly traded and owned entities who can now issue stocks in the market.

Starting to Stock Trade

Now that you understand what a stock is, the term "stock trading" may seem self explanatory. A stock trader is a person or company that buys and sells stocks in financial markets. Becoming a stock trader is not the hard part. Continuing to be an active trader, minimizing your loses, and maintaining your wealth overtime is. Before you read further about how to actually become a stock trader, you should ask yourself what you want to get out of stock trading and how much time you will realistically be able to put in.

An investor who places ten or more trades per month is an active trader. Typically, active trading involves using a strategy that relies heavily on timing the market and trying to take advantage of short-term events (at the company level or based on market fluctuations) to turn a profit in the coming weeks or months. Another type of investor is a day trader. Day trading is when an investor buys, sells, and closes their shares the same stock in a single trading day, caring little about the inner workings of the underlying businesses. The aim of the day trader is to capitalize on daily price fluctuations over a span of a few minutes, hours, or days then find a new stock to trade. Finally, a long-term investor uses a passive investing strategy. Their approach to buying and selling stocks is considered passive in that they tend not to buy and sell often. Instead of relying mostly on technical analysis (as active and day traders do) and trying to time the market, passive investors use fundamental analysis to carefully examine the strength of the businesses and then buy shares with the hope that they’ll be rewarded over years — decades, even — through share price appreciation and dividends. For example, any long-term investor who bought Amazon (AMZN) ten years ago is currently capitalizing on the company's price appreciation and dividends.

Many people who feel that they are not experienced enough or know that they do not have time to stock trade for a living chose to hire a professional investor to trade for them. The drawbacks of doing so are that a you have to pay your investor and you are trusting someone else to trade stocks and risk your money that you could do yourself with a little research and effort.

The stock trader you initially decide to be can definitely change as you go along. There is no right or wrong way to stock trade. The most important thing is deciding which style is the right one for you.

Choosing the Right Stock Broker

A stockbroker connects the buyers and sellers of stocks in the market. Stockbrokers are a medium that executes buy and sell orders by investors, trading on behalf of individuals and companies. In exchange for their services, stockbrokers charge a flat fee or commission, which is a percentage of the sale or purchase price of the stock. Most stock brokers also require an investor to deposit a minimum amount of money to open an investment account. The commission and minimum retirement prices vary between each stock broker. The stock broker you choose is crucial, so it is important for you to do a lot of research and weigh your options according to the type of trading style your have.

Here is a breakdown of some of the best online brokers for stock trading.

https://www.ally.com/invest/

Best For: Low costs

Highlights: Low commissions; free tools and research

Commission: $4.95 per trade

Account Minimum: $0

Start Trading: https://www.ally.com/invest/

Best For: Traders

Highlights: Broad educational content;

no inactivity fees

Commission: $6.95 per trade

Account Minimum: $0

Start Trading: https://www.tdameritrade.com/home.page

Best For: Retirement; Mutual funds and ETFs

Highlights: Among largest selections of commission-free ETFs

Commission: $4.95 per trade

Account Minimum: $1,000

Start Trading: https://www.schwab.com/

Best For: Mobile Trading; Options Trading

Highlights: Large selection; reasonable commissions and fees

Commission: $6.95 per trade

Account Minimum: $500

Start Trading: https://us.etrade.com/home

Best For: Investors

Highlights: 300 commission-free trades for two years with a deposit of $50,000 or more

Commission: $4.95 per trade

Account Minimum: $2,500 ($0 for IRAs)

Start Trading: https://www.fidelity.com/

Best For: Rewards Program

Highlights: No account minimum; customer support; variety of research reports

Commission: $6.95 per trade

Account Minimum: $0

Start Trading: https://www.merrilledge.com/

Best For: Beginniners

Highlights: No commissions or account minimum; free tools

Commission: $0 per trade

Account Minimum: $0

Start Trading: https://robinhood.com/

The Pep Talk

Stock trading is going to be challenging and frustrating, but in the end, rewarding. The fact that you have made it to the end of this article means that you are already on the right path to being a dedicated and successful investor.

Whether you are a new or already experienced investor, there is always more to learn. Read as much as possible! Read books about stock trading. My favorite book is How to Make Money in Stocks, by William O'Neil. Read articles about stocks, trading techniques, current news, everything. In later posts I will talk about how everything that is going on in the news is directly reflected in the stock market. Read and follow the market. Websites like Google Finance and Yahoo Finance serve as great resources for investors with in-depth and technical analysis. Finally, I encourage you to find a mentor. A mentor could be a family member, a friend, a past or current professor, a co-worker, or any individual that understands the stock market. Ultimately, a great mentor is willing to answer questions, provide help, recommend useful resources, and keep your spirits up when the market gets tough... in other words the Bells and Whistles community!

Good luck!