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How to Trade Stocks Through an Online Broker

A guide to placing stock trades using your online brokerage.

Trading stocks online via a web based platform like the one used by TradeKing.com, is one of the most popular means of trading. Online stock trading has opened up the world of financial markets to a broad new range of investors from different backgrounds, and as a result the demographic of the typical investor has changed dramatically, to encompass those with an internet connection and a willingness to learn online stock trading.

Selecting stock market strategies that will work best for you can be a complicated process. But it's not beyond the reach of even the absolute beginner to grasp the underlying concepts and the theory behind successful online stock trading.

Pick A Stock Trading Platform

Before getting started trading online, you'll need to compare online brokers and find a trading platform that meets your needs. The trading platform will play a crucial role in your ultimate success or failure as an investor. After all, it's the mechanism by which you execute your trades and access the markets. When choosing an online stock trading platform, look for a combination of low transaction costs, comprehensive reporting, versatile trading tools, and a comfortable interface like the one on TradeKing.com.

Pick Your Instruments

Online stock trading is much more than buying a few shares here and there. Before entering your first trade, you should consider the available instruments in which you can invest. Your trading platform will give you access to stock markets as well as derivatives markets, which will enable you to enter into a broader range of transactions. For the absolute beginner, it is perhaps advisable to stick to a more simplistic investment strategy, opting for simply buying and selling securities. However, for the more adventurous or for those inclined to give their investment options full consideration, it may be worthwhile to study the possibility of entering the derivatives market by trading options.

Pick A Strategy

Once you've elected the instruments you intend to trade, the next and final step in online stock trading is to choose your strategy. Most traders use some form of strategy, to try to reduce chance and gain some level of consistency in their approach. Of course, experienced traders have highly individualized strategies, but some common basic strategies include:

Buy and Hold

A buy and hold strategy sets the trader up for the long term. Stocks are bought with a view to the price of the security increasing over time - perhaps over five, ten or even twenty years. Broadly speaking markets have consistently increased over ten year periods in the last century, and the buy and hold strategy seeks to take advantage of price increases over this sort of timeframe, and is perfectly suited to online stock trading.

Technical Trading

Technical traders focus on charts and graphs, watching for specific patterns in the price fluctuations of stocks or indexes that might indicate buy or sell signals. There are hundreds of technical patterns, or "events" that are associated with future bearish or bullish movements on the security. You can learn more about specific technical events and how they may be predictive of stock movements on TradeKing.com.

Options Trading

Options are more popular with investors today than ever before, and they continue to grow in popularity. That's because options allow traders to create profitable strategies whether the market is bullish, bearish or neutral and enables them to gain leverage over larger numbers of shares using options than by purchasing securities outright. However, some caution must be exercised when trading options. Because whereas the majority of stocks and indexes will retain some portion of their value over time, it is possible for options to expire worthless, and if you don't manage your trade well, it is possible to lose your entire investment.

These are but a few of the possible trading styles available to you. Learn more about online stock market investing and how to put these and other strategies into action by opening a TradeKing account now.

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