“The secret of getting ahead is getting started. The secret to getting started is breaking your overwhelming tasks into small manageable tasks, and then starting on the first one.” – Mark Twain

Let’s see if this scenario matches what you are going through.  You want to trade stocks and learn about the stock market. You hear stories about people making money doing this, and you might have heard about the millions of dollars that famous investors like Warren Buffet have made.  

After searching “how to trade stocks” and clicking on some random websites or sales pages you get overwhelmed and do something else instead.   

Trust me, I’ve been there.  I did this over and over again for months.

The best way I can describe this is to imagine how you would feel if I asked you to quickly drive me to the hospital and you have never driven before and don’t know the first thing about cars or driving.

You need to know how to start the car, what buttons, knobs, and levers do what.  How do you make the car go forward? Once I start making the car move, how do I know how not to smash into other cars that are driving around?  

Once you have that figured out, how do I find the hospital?

Think about the amount of time it would take you to learn all of these things on your own from searching the internet.  Imagine the crazy websites you’d come across and how many people are trying to sell you something.

Don’t worry.  I can help. I will explain what I did step by step and save you the months and months of searching.    

First, let me explain how I overcame this overwhelming scenario.  After months of searching little tidbits about stocks, how to trade, what stocks were making money, different types of stocks, etc, etc, etc, I made a plan.  I decided that I needed to come up with a step by step plan of how to get started. 

And just a note.  I’m not trying to sell you an online course or some other crazy scheme.  I will put links to services that I use and if you click on them and use them I will get a small kickback for the referral.  Hopefully, this eventually pays for my website operating costs but I’m not planning on it.  

The second reason I’m doing this is to start a community of people that I can discuss trading stocks with.  I love discussing stocks that I’m going to buy with others and love to hear what other people are interested in buying.  

Now let me show you step by step what I did to start trading stocks and feel comfortable with which stocks to buy.  This is going to be broken up over a couple of posts and I will go into more detail on some of the items.

Step 1: Pick an Online Broker

I researched this quite a bit and ended up going with Questrade.  After using them I know I made the right decision.  

Their fees are $4.99 minimum a trade compared to $9.99 minimum with others.  If you’re not investing tons of money these fees can seriously cut into your profit.  

Every time you buy a stock you pay $4.99 and every time you sell, you pay $4.99.  If you are buying $500 worth of a stock it has to go up 2 percent to break even with Questrade but it will have to go up 4 percent with most of the other online brokers.  

Also, if you are interested in ETF’s (we’ll discuss this later) you don’t pay to buy them and only pay to sell them. 

I have called their customer service with questions and it was top notch.  On that note, I do use them and endorse them. If you do sign up, click here , and I get a kickback for recommending them to you.

I recommend opening a Tax Free Savings Account if you are Canadian.  This way you don’t have to declare any profits on your income taxes and you can still take the money out whenever you need to.  There is a limit to how much you can put in, but if you are close to this limit you probably have financial advisers taking care of your money already. 

Step 2: Decide What Kind of Trader You Want to Be.

You need to decide what kind of trader you will be.  This is for your own sanity and to help decide which stocks you will want to buy.

There are 3 main types of traders.

Day Trader – You buy stocks hoping they will go up by the end of the day and then sell them before the market closes at 4:00.  Then do the same thing the next day. This is very stressful and harder to make money at. You basically have to be sitting in front of you computer watching constantly.

Swing Trader – You buy stocks and want to hold on to them for a few days or weeks until they go up.  At first you will be checking your stocks all the time but it will not be necessary like day trading.  This is typically what I do.

Long Term Trader (also called Investment Trader) – You are buying stocks that you want to hold on to for a long time.  Years even. The idea behind this is that you are buying part of a company that you believe in.

Step 3: Start Looking at Stock Summaries

You might have to wait a day or two for your account to be verified and then for the money to transfer from your bank account into your new trading account.  While you are patiently waiting, start looking at stocks. Keep notes on what you would buy it at and what you would sell it at. Don’t forget about the $4.99 fee when you are counting your profits.

First, you need to know what all the terms mean on a stock summary.  In plain English. This is boring, but once you remember the terms that you deem important it will be second nature.

Here is a typical Stock Summary.  Let’s go through the terms.

Previous Close: is the price of the stock at the time the market closed the day before.  Keep in mind, the stock market is only open on business days.

Open: is the price of the stock at the time the market opened today.

Bid: is the price that traders are willing to pay for the stock right now.

Ask: is the price that traders are willing to sell the stock for right now.

Day’s Range: Is the range between the highest price of the day and the lowest price of the day.  If you want to be a day trader this would be the largest possible profit you could make in one day by buying at the low and selling at the high.

52 Week Range: This is the range between the highest price in the last 52 weeks and the lowest price in the last 52 weeks.  What I do is try to buy stocks when they go down and are close to the 52 week low. You can buy when they are closer to the 52 week high if you think the company is just going to get bigger and bigger.

Volume: Is how many stocks have been traded today.  This can be an important indicator of what the masses are doing.

Average Volume: This is how many stocks have been traded on average per day.  This compared to the Volume will tell you if there is more buying or selling than normal today.  For instance, the Volume above and the Average Volume are close to the same, showing that this day was just a typical day for this stock.

Market Capitalization (Cap): This is what the company is worth.  It is figured it out by multiplying the stock price by how many shares are available.   

Beta: This is how volatile a stock is.  Or, how much this stock price changes in relation to the rest of the stock market.  If the market goes up in general and this stock goes up the exact same amount the Beta will be 1.  Numbers greater than show that the stock prices change more than general stock market. A very high Beta could mean a risky stock.  A number lower than 1 means that the stock does not change very much even if the general market changes. A lower Beta means a safer stock, but it also usually means lower profits for you as an investor.

P/E Ratio: This is the ratio between how much a stock costs and how much it earns.  When you buy a share you are buying a part of the company. In the example above if you buy a share in this company, you are buying one share for $267.62 and the company expects to make $2.54 per share (this is the EPS, Earning per Share), giving a P/E Ratio of 106.13.  Another way to think of this is how many years will it take to get my money back that I invested. This share will take over 100 years for you to make your original investment of $267 back. Ideally, if you want to invest for the long term in a company, shoot for a P/E Ratio lower than 10.  This means every 10 years you will get your original investment back, while still keeping your share in the company. For Day Traders and Swing Traders this isn’t as important because you are only interested in keeping the stock for the short term.

EPS (Earnings Per Share): This is how much the company makes in earnings per share of stock.  Many stocks have negative numbers meaning they are losing money.

Earnings Date: All public companies must produce their earnings and other financial reports quarterly.  The Earnings Date can be used by Day Traders and Swing Traders because it sometimes causes an illogical sell-off of stocks based on the emotions of the shareholders.  This can cause the price of the stock to go down for no reason. This is a perfect time to buy and hold it for a few days or weeks when people start buying back the stock again causing the price to go higher.

Forward Dividend and Yield:  A Dividend is an amount of the profit that the company pays to the shareholders.  You have to own the stock the 2 days before the Ex-Date or you will not receive the dividend.  The Yield is the percent of the stock price that the dividend equals. For example, if the yield is 5%, you will earn 5% per year on the amount of money in shares you have.

Ex-Dividend Date:  You need to own the share a couple of days before this date in order to receive the Dividend that the company will pay-out.

1 Year Target Estimate:  This is the price analyst thinks the stock will be in one year.

Please see future posts for how I choose stocks, the biggest mistakes I’ve made and still make etc.

If anything is unclear or you have questions I have not answered please leave a comment.

Everything on this website is purely biographical.  I am not recommending stocks to buy or buying strategies etc.

Click this link to get $50 of worth of free trades!

https://www.questrade.com?refid=thestocktutor