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Online Stock Trading 101: A Beginner's Guide

It's crucial to educate yourself before you wade into any type of investment or investment strategy. This beginner's guide to online stock trading will give you a starting point and walk you through several processes: choosing a discount broker, the 12 types of stock trades you can make, how to select individual stocks, uncovering hidden fees, expenses, and commissions, and much more.

  01 Choosing a Broker for Your Online Trading

If you haven't already opened a brokerage account with a respected stockbroker, do it now. Read our guide to choosing a low-cost stock broker and open an account so you can begin trading stocks.  Also, note that there is a difference between a prime brokerage and other brokers.

02 The 12 Types of Trades You Can Place with a Stock Broker

Twelve types of trades are available when you begin online stock trading. They include the market trade, limit trade, stop loss, day orders, good-till-canceled trades, trailing stops, and bracket trades. Walkthrough this step-by-step guide to stock trading and find a definition and example for each of these terms.

03 How to Avoid Expenses That Can Destroy Your Stock Trading Profits

The biggest enemy of successful stock trading is expenses. They represent money you're shredding without any benefit to you.  Commissions and fees are good examples of these. Learn how to avoid them.

04 How to Trade Stock on Margin with Borrowed Money

If your stock trading brokerage account is for speculation and you want to roll the dice, you can actually borrow money from your brokerage firm. This is known as trading on margin. This approach to trading stocks has some big potential pitfalls you'll have to guard against, however.

05 How to Short a Stock

When you've been approved for margin stock trading, you're also eligible to short stock. Almost every successful stock trader has shorted stock at one time or another. When you short stock, you make money when the company's shares fall—or, even better yet, when they crash. The problem is that you can expose yourself to unlimited liability when you do this.

06 Using ADRs to Trade Foreign Stocks in the United States

If you're interested in stock trading and you want to buy or sell shares of foreign companies, it might be possible to do that right here at home if the corporation you're considering has American Depositary Receipts (ADRs). It's fairly simple to find out if a business has them and how they're different from regular stock.

07 The Role of Market Makers in Stock Trading

Stock trading wouldn't even be possible without market makers. Every time you buy or sell the stock, the odds are good that your order is going to go through a market maker on one of the major stock exchanges.

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The Best Technical Analysis Trading Software

There are those who say a day trader is only as good as his charting software. While that's debatable, it's certainly true that a key part of a trader's job — like a radiologist's — involves interpreting data on a screen; in fact, day trading as we know it today wouldn't exist without market software and electronic trading platforms.

A lot of software applications are available from brokerage firms and independent vendors claiming varied functions to assist traders. Most brokerages offer trading software, armed with a variety of trade, research, stock screening, and analysis functions, to individual clients when they open a brokerage account. In fact, the bundled software applications – which also boast bells-and-whistles like in-built technical indicators, fundamental analysis numbers, integrated applications for trade automation, news, and alert features – often act as part of the firm's sales pitch in getting you to sign up.

Much of the software is complimentary; some of it may cost extra, as part of a premium package; a lot of it, invariably, claims that it contains "the best stock charts" or "the best free trading platform." Fact: There is no single best stock chart or best stock screener software. There are too many markets, trading strategies and personal preferences for that. But we can examine some of the most widely-used trading software out there and compare their features. Whether their utility justifies their price points is your call.

MetaStock: One of the most popular stock trading software applications, MetaStock offers more than 300 technical indicators, built-in drawing tools like Fibonacci retracement to complement technical indicators, integrated news, fundamental data with screening and filtering criteria, and global markets coverage across multiple assets: equities, derivatives, forex, futures, and commodities. Both its MetaStock Daily Charts Subscription and its MetaStock Real Time packages (especially geared for day traders) include its highly praised stock charts software.

Worden TC2000: If you are interested exclusively in U.S and Canadian stocks and funds, then TC2000 offers a good solution. Features include stock charts, watch lists, alerts, instant messaging, news, scanning, and sorting.TC2000 offers fundamental data coverage, more than 70 technical indicators with 10 drawing tools, and an easy-to-use trading interface, as well as a backtesting function on historical data. It does not, however, offer automated trading tools, and asset classes are limited to stocks, funds, and ETFs.

eSignal: Another popular stock trading system offering research capabilities, the eSignal trading tool has different features depending upon the package. It has global coverage across multiple asset classes including stocks, funds, bonds, derivatives, and forex. eSignal scores high on trade management interface with news and fundamental figures coverage, and it's stock charts software allows for a lot of customization. Available technical indicators appear to be limited in number and come with backtesting and alert features.

NinjaTrader: An integrated trading and charting software system, providing an end-to-end solution from order entry to execution with customized development options and third-party library integration compatible for more than 1000 apps and add-on products, NinjaTrader is one of the commonly used research and trading platforms. It's especially geared to futures and forex traders. Apart from the usual technical indicators (100+), fundamentals, charting, and research tools, it also offers a useful trade simulator, enabling risk-free trade learning for budding traders. NinjaTrader is free to use for advanced charting, backtesting, and trade simulation.  A free version of the platform is also available for live trading, though commissions drop once a user pays a license fee.

Wave59 PRO2: Offering advanced level products for experienced traders, Wave59 PRO2 offers high-end functionality, including "hive technology artificial intelligence module, market astrophysics, system testing, integrated order execution, pattern building and matching, the Fibonacci vortex, a full suite of Gann-based tools, training mode, and neural networks," to quote the website.

EquityFeed Workstation: One prominently highlighted feature of the EquityFeed Workstation is a stock hunting tool called "FilterBuilder"— built upon a huge number of filtering criteria that enables traders to scan and select stocks per their desired parameter; advocates claim it's some of the best stock screening software around. Level 2 market data is also available, and coverage includes OTC and pink sheet markets. However, it offers limited technical indicators and no backtesting or automated trading. Its product-specific search tools like ETFView, SectorView, etc. rank among the best stock screening software. And it even offers free trading platforms – during the two-week trial period, that is.

ProfitSource: Targeted at active, short-term traders with precise entry and exit strategies, ProfitSource claims to have an edge with complex technical indicators, especially Elliot Wave analysis and backtesting functionality with more than 40+ automated technical indicators built-in. Its asset class coverage spans across equities, forex, options, futures, and funds at the global level.

VectorVest: With trading platforms and analytics software that cover different geographic regions (for the U.S., UK, Australia, Canada, Singapore, Europe, Hong Kong, India, and South Africa), VectorVest is the one for the intercontinental crowd. Its program offers comprehensive coverage for common technical indicators across major stocks and funds all around the world. VectorVest also offers strong backtesting capabilities, customization, real-time filtering, watch lists, and charting tools.

INO MarketClub: For users specifically looking for charting software, INO’s MarketClub offers technical indicators, trend lines, quantitative analysis tools, and filtering functionality integrated with charting and trading system — not just stocks, but futures, forex, ETFs and precious metals.

The Bottom Line

The decision to go beyond free trading platforms and pay extra for software should be based on the product functionality best fitting your trading needs. You can often test-drive for nothing: Many market software companies offer no-cost trial periods, sometimes for as long as five weeks. Novice traders who are entering the trading world can select software applications that have a good reputation with required basic functionality at a nominal cost — perhaps a monthly subscription instead of outright purchase — while experienced traders can explore individual products selectively to meet their more specific criteria.