When it comes to platform trading, figuring out where how to get started can be one of the biggest challenges for beginning investors. While traders used to rely on their brokers to handle their investments for them, these days, online trading platforms have made it possible to buy and sell assets online. We’ll walk you through the basics of what you need to know to set up and get started with your own platform trading account.
Choosing a Trading Platform
In order to start trading, you’ll first need to open a brokerage account on the trading platform of your choice. Unlike a checking or savings account, a brokerage account allows you to deposit money that you can use to trade stocks, ETFs, bonds, and other assets.
The good news is that now there are plenty of reputable platforms out there that allow investors to sign up and trade on a commission-free basis. This means that the brokerage platform doesn’t charge you to make your own trades.
It’s important to do enough research to figure out which platform offers the best tools for you. Some of the most popular choices include:
- Fidelity– Fidelity offers a wide range of investment options and some of the best research tools for every type of trader.
- TD Ameritrade– TD Ameritrade is a great choice for beginners due to its extensive educational offerings.
- Schwab– Schwab is also an excellent choice and offers a wide range of investment tools.
- SoFi– SoFi is another popular choice for beginners because it offers fractional trading, free financial planning sessions, and career coaching.
- WeBull– WeBull is arguably one of the most fun brokerages because it offers social media-style commentary about each asset, a learning center with prizes, and plenty of promotional offers.
Sign Up for a Brokerage Account
The trading platforms of many financial institutions offer a variety of different account types, from checking accounts to IRAs. If you want to start trading stocks, ETFs, options, or bonds, you’ll want to sign up for a brokerage account.
The sign-up process is generally fairly quick and easy, no matter which brokerage you choose. It mostly consists of entering basic information, such as your name, address, and other personal contact information. You’ll then need to verify your identity, usually by uploading a photo of your driver’s license or other official documents.
Once your account has been set up, you’ll then need to fund it. The easiest way tends to be connecting it to your checking account, which enables you to make transfers between the two. Some platforms also allow you to fund your account through mobile check deposits.
Identify Your Investment Goals
Now comes the hard part, which is figuring out what to invest in. Some of the most common investments for beginners include:
- Stocks – Stocks, also known as shares or equities, allow you to purchase partial ownership in a publically traded company. If the company does well, the value of your stock will likely increase. If the company does poorly, however, the value of your stock will go down.
- Mutual Funds- Think of a mutual fund as a group of investors who all pool their money together. The money is then invested in a number of different companies that usually share a particular theme or sector.
- ETFs- Exchange Traded Funds or ETFs are similar to mutual funds in that they fluctuate in value based on the performance of a wide number of stocks. ETFs tend to be very beginner-friendly because they allow you to invest in a wide number of companies that share the same theme, sector, or index.
- Bonds- Bonds are basically loans that you can make to the government, a business, or another entity. You can then make money by collecting interest for the life of the loan.
Identifying Your Trading Style
Finding the right investments for you will largely depend on identifying your goals, risk tolerance, and investment style. Start by asking yourself how long you plan to hold each investment before selling.
In general, bonds and mutual funds tend to take much longer to generate a profit and are best for long-term holders. While both are lower risk than investments like stocks, they also tend to generate lower returns.
Stocks and ETFs vary widely and can be used as long or short-term investing. Broadly speaking, there are three different types of traders, and they each utilize very different trading strategies:
- Day Traders – Day traders seek to make a profit on volatile stocks that are experiencing major price movement. They never hold a stock overnight and trade whatever stocks are experiencing the largest volume and volatility each day.
- Swing Traders- Swing traders attempt to profit off of the price movement of stocks over a few weeks or months.
- Long-Term Traders- Long-term traders are in it for the long haul and often hold stocks for many years.
While certain ETFs, such as leveraged inverse ETFs are designed for short-term traders, others can make solid long-term investments. Which type of trader you are should largely influence which specific stocks or ETFs you invest in, so it’s important to learn all you can about the best strategies for your trading style.
Different Types of Trading Orders
Once you’ve determined what you want to invest in, it’s time to start placing orders. While the “buy” and “sell” buttons you’ll find when you bring up any asset may look pretty straightforward, it’s important to note that they’ll often come with a scroll-down menu. This is because there are a variety of different ways to buy and sell certain assets:
- Market Orders- a market buy or sell order will usually execute immediately. That’s because it will place your trade at the first available asking price.
- Limit Orders- Limit orders allow you to be a bit more specific by setting the highest or lowest price at which you’re willing to buy or sell an asset. They’ll only execute at the price or better.
- Stop-Loss Orders- Stop-loss orders are a great way to help minimize risk. They allow you to specify a certain price that, if reached, will trigger an automatic sale. There are also trailing stop losses, which trigger an automatic sale if a stock loses a certain percentage or amount of its value.
- Day, GTC, and EXT orders- You’ll also want to be specific about how long you want each order to remain active. Day orders will cancel at the end of each trading day if not executed, while “Good Til Closed” or GTC orders will remain active for up to 90 days. EXT orders should be used for trading during extended hours.
We hope this has helped give you some insight into how to get started in platform trading!
