To make the most of your stock trading experience, consider the following:
Do your homework. Making informed trading decisions is crucial. Research the financial health and growth prospects of the companies you’re interested in by reviewing annual reports, company alerts, prospectuses and analyst ratings. Some online trading platforms are better equipped for research than others, but you can also rely on third-party applications and market research websites, like Bloomberg or Yahoo Finance.
Follow the news. Understand the health of the economy, interest rate decisions, government policy changes, levels of investor confidence, exchange rates and the performance of stock markets in other countries. All of these can influence when to invest.
Buy what you know. If you don’t understand it, think twice before you buy in. Rather than investing in a company, industry or sector you know nothing about, start with industries and businesses you understand.
Diversify. A tried and true investment strategy utilized by many investors, both new and experienced, is to spread your investments across a range of industries. This is called diversification — a fancy way of saying: don’t put all your eggs in one basket. If you buy stocks across five or six industries instead of just one or two, you can be better protected against losses if one particular industry experiences a sharp downturn.
Explore blue-chip companies.Blue-chip stocks are America’s biggest, best-established companies, many included in the Dow Jones Industrial Average. They’re typically a source of reliable returns and minimal risk.
Consider growth stocks. Small companies, whether they’re listed on a stock exchange or traded over-the-counter, have a shorter business history. Some investors find these shares attractive because they offer the potential for large returns — but carry a significant risk of loss.
Pay attention to trading hours. If you place a market order after trading closes for the day, your broker may place the trade at open the next day — even if the price has significantly changed. Most US stock exchanges close a 4 p.m. ET, though some brokers offer after-hours trading.
Practice new strategies. Some online platforms, like Webull and TD Ameritrade, offer paper trading, which is a simulated market that allows you to make hypothetical trades using up-to-date market prices. This is a practical way to test trading strategies without risking any real money.