How to Do Online Stock Trading

• Step 1

  Decide whether your account will be an actively traded account or more of a buy-and-hold account. Choose your broker among the many hundreds available based on how you will use the account. Open the account and fund it online if possible. Assume that trading will take a few days to actually begin, as signatures have to be verified and funds must clear the bank. Use the time to familiarize yourself with the account.

• Step 2

  Do your own research and understand why you are investing. Diligence and following sound trading rules determine success. Understand the difference between technical trading (using price action to determine a stock's promise) versus fundamental (the study of balance sheet and macroeconomic data), and invest in the style with which you are most comfortable. Brokerage firms usually provide "papertrade" or practice accounts, as well as independent research.

• Step 3

  Open a margin account if you intend to use option strategies, such as covered call writing and put writing, or to buy stocks on margin. You cannot do any hypothecation (loan of securities or borrowing) without margin documents in place. Use the research and testing tools many brokerages provide. This balanced information is usually better than the investment "story" most brokers give.

• Step 4

  Write down every trade you intend to enter on paper with a note as to why you think it is a good trade and your sense of the market at the time. Enter the trade from the piece of paper to eliminate the chance of error from careless mistakes. Review your trade once it is entered. It will probably be confirmed within a few minutes. Take the time to make sure it is correct. You are responsible---not the brokerage firm---for mistakes until they are cleared up.

• Step 5

  Keep a phone number handy for reaching your broker. This is very important. Sometimes, you will need to enter trades by voice when markets are hectic and you cannot get into the website to enter the trade.

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• Make certain you have your broker's telephone numbers in case you must talk to an agent and Internet access is not available.
• Make certain you have your broker's telephone numbers in case you must talk to an agent and Internet access is not available.
• Do not trade from emotion. Write down every trade and the reason for the trade before entering the order.
• Do not trade from emotion. Write down every trade and the reason for the trade before entering the order.

References & Resources

• Scottrade Brokerage Account
• E*Trade Homepage
• Bloomberg News Homepage