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 This article will provide you with a step-by-step guide on how you can acquire knowledge on the basics of trading stocks online. Before we begin, you must first realize that successful stock trading requires skill and a strong determination to "win". As such, the trading profession must be approached with the same respect as a medical student studying to become a surgeon. To succeed in this business, it will require your utmost dedication, time and most of all your burning desire to be a great trader/investor.
What Are Stocks & How Do You Trade Them?
This article on Why Companies issue Stock & Why people Invest In Them will give you a basic idea on the purpose of stocks and where you can trade them online. The stock markets in the United States are undoubtedly one of the best in the world in terms of liquidity and regulatory governance. The US markets also give the astute trader some very outstanding potential for quick and substantial profits. Read Major Stock Markets and Major Stock Indices for a basic summary on what every investor should know about the US markets. Once you are more experienced trading the markets, you can delve deeper into them by studying Larry Harris' excellent book on the Microstructure of Markets called Trading and Exchanges. The content of this book reads like a textbook out of an MBA course but it is outstanding in its level of practical detail and real-life insight into today's modern capital markets.
Fundamental Investing or Technical Trading?
 Most traders/investors settle on which approach they are more comfortable with quite early on in their investing/trading career. Fundamental investing essentially concentrates on the company's core business and how it is performing. More importantly, fundamental investing looks at what are the company's prospects going forward. The understanding of the concepts of "forward looking" or "forward guidance" is key to stock trading because the value of a stock is based on how the company is going to perform in the future and not on what it has done in the past. As you can see, fundamental analysis can be quite subjective.
Technical trading on the other hand seeks to take the subjectivity of "forward guidance" out of the equation by solely concentrating on the price action and volume of stock traded. The basis is that all material information regarding a company is factored into the stock price. Experienced technical analysts can often detect the buying or selling by informed players or the "smart money", solely by analyzing the price action. A newcomer however should be forewarned as the Technical Analysis arena of late has gotten very packed with all sorts of analytical tools which often leads to investors suffering from "analysis paralysis". It is therefore critical for a new investor to seek to be an informed technical investor rather than jumping at the latest technical analysis mumbo-jumbo.
Many successful traders adopt a combination of fundamental and technical analysis to guide their trading decisions. The understanding of how fundamental news, when released to the public, affects the stock price technically is priceless. The old saying of "Buy the rumor and sell the news" is very apt to this discussion as an experienced technical trader can detect the buying or selling that may be based on whispers or rumblings in the market, which he may or may not have heard or be privy to. He can later close out his position for a profit when the material fundamental news is released and the stock price jumps or tanks as a result.
Some good reads for fundamental analysis are the classics Beating The Street by market legend Peter Lynch and The Warren Buffett Way by Robert Hagstrom. As for technical analysis books, two of the best include Trading For A Living by Dr. Alexander Elder and Martin Pring's Introduction to Technical Analysis.
Swing or Day Trading Stocks?
 The next factor to consider is the time-frame that you are going to hold-on to a stock position. Some people prefer quick gains for a smaller profit while others hold on longer for greater returns. Those who open and close a position within the same trading day are often referred to as daytraders. Daytraders try to make a few cents profit on each position but in order to make a decent profit worth their while, they have to take on a larger size position than a swing trader would normally have to. Daytraders and traders from proprietary trading shops like SwiftTrade and Bright Trading, normally have access to higher intraday margin for intraday trades. What this means is that these daytraders are given enormous leverage to take on huge intraday positions. This type of trading is very speculative and it very much depends on real-time access to fast news, fast market order-entry system and a keen ear to the whispers on the trading floor. Find out more about daytrading at our Day Trading Resources page.
Swing Traders, on the other hand, usually employ fundamental and technical methods to time their entries. While fundamentals-based traders buy when a stock is trading below perceived valuations and sell when the valuations get too rich, technical traders, on the other hand, look for technical setups based on chart price patterns and volume data. Swing traders, in general, have a potential for a much higher gain than daytraders but they are also putting their portfolio at greater risk due to overnight geopolitical and other market moving events. Here are some tips on Choosing a Stock for Swing Trading and a discussion on Stop-Loss Placement.
Choosing a Stockbroker Suitable for Your Trading Needs
In order to buy or sell stocks, you will need to find a good stockbroker suitable for your trading style. Essentially, there are two types of brokers for trading the financial markets: the full-service brokers, like Goldman Sachs and Morgan Stanley, and the online discount brokers, like Ameritrade and Interactive Brokers. Read Overview of Choosing a Stock Broker, followed by Online Discount Broker Comparison Tips and then Full Service Broker Comparison Tips in order to get a good idea on which type of broker is suited for your specific trading needs. Remember, cheapest may not always be the best for you.
Stock Trading Software
Advances in personal computing power have enabled software developers to create stock trading software so advanced that it can track in real-time, tens of thousands of stocks and other financial instruments globally, looking for those that match your specific criteria. Only half a decade ago, this would have required the huge resources of a big-time hedge fund but now all this software & computing power is available to the trader at home. These articles, Overview of Trading Charting Software and Data Packages and What is the Best Technical Analysis Software, will give you a more detailed look into what is available.
Stock Trading Hardware
 The next item to consider for trading stocks online is your computer hardware. In order to know what kind of system or how powerful a computer you need, you first have to identify how will you be monitoring the markets i.e. are you going to daytrade, are you going to scan the market in real-time looking for opportunities or are you going to be an end-of-day swing trader? Casual investors do not need specialized systems as compared to, say a full time professional trader monitoring hundreds of stocks, futures and options. The articles Real-Time Trading Computer System Requirements and End-of-Day Trading System Requirements will break down the needs of the different groups of investors and will recommend appropriate systems for the different needs. Active traders should seriously consider adding Multi-Monitor System Setups for their trading so as to be able to view a greater number of stocks in real-time. Some other stock trading hardware considerations include How Much RAM Is Enough For a Trading Computer System and CRTs vs LCD Monitors for a Trading Computer System.
Conclusion
Stock trading can be a very profitable endeavour when a trader has acquired the necessary skills. A good stock trader is truly a resident of the world as he can be anywhere in the world and trade any market through the power of the internet. The main factor that separates the mediocre traders from the great ones is the mindset. You can be technically proficient in all aspects of the market but if you are not ready to receive the riches that the market has to offer, you are bound to face obstacles. Mark Douglas' book Trading in the Zone is a must read for traders looking to improve the psychological component of their skills.
With that, here's wishing you a great journey and may your road to becoming a successful trader/investor be a smooth one!
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