How to Trade Stocks? 7 Steps for Beginners

Over the long term, the stock market has historically outperformed other types of investments. There are numerous companies listed. The better you are at identifying the right stocks to invest in, the more you succeed. In this article, Headway analysts share how you can make the most of stock trading step by step.

Short-term trading VS long-term investing

You can deal with stocks in several ways: You can make a long-term investment and hold them for some time when the price will rise, or you can trade them short-term with heavy reliance on technical analysis – and this speculative strategy may profit you faster. 

To find the best asset for stock trading, you need to analyze a company’s financial statements, business model, and competitive advantages. It’s important to stay informed on industry and market trends and diversify your portfolio.

Both approaches to stocks, short-term and long-term, can be beneficial for you. In this article, we will provide some tips to help you identify the right stocks for quick short-term trading.

Step 1. Make a research

When considering stocks to trade, it is important to thoroughly research the company beforehand. Look for stable companies with a good reputation in the financial markets. Their predictability will help you to avoid large fluctuations in the movement of the stock. 

Oftentimes, well-known companies (such as Tesla, Apple, or else) are the best option for trading. 

Step 2. Use technical analysis

If you observe the movement of stocks in the past, you can determine the general trend and choose companies whose stock shows steady and consistent growth during market hours.

Technical analysis can help you determine when to enter the market so that you can take advantage of the price and benefit from the potential correction movements. You will also be sure when to exit the market. 

For instance, in mid-August 2022, Apple’s stocks were above 170 USD per share. In early 2023, they fell below 130 USD. Now, they have already gained up and cost over 190 USD. With technical analysis, you can navigate these price waves and profit from them on time.

Step 3. Use fundamental analysis

By monitoring the distribution of profits, the company’s reputation in the market, and future growth expectations, you can determine the company’s value and evaluate the stock. 

Tip: Do you know any companies that are highly reputable in the market now? They may be your potential source of trading profit.

Step 4. Monitor company’s and market activity

Gain knowledge of the company’s activities. You should follow the news related to the sector as well as the economic and political news that affects the market in general. 

Technology or the entertainment sectors often influence other industries as well.

Step 5. Diversify your investments

To avoid unnecessary risks, you should collect a well-diversified portfolio of trading assets. When you distribute risks among different stocks and other asset groups, benefits outweigh losses.

Step 6. Educate yourself

No knowledge is ever enough. You should continue to learn, monitor the markets and their developments, and update your strategy regularly. Remember to refresh the basics of trading with our free educational course.

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Step 7. Trade stocks on Headway

Now that you know what to do, sign up on Headway to trade over 200 stocks on MetaTrader 5. Your stock profits await!

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