Stock trading can be a complex business, but it doesn’t have to be. You can learn to do it yourself at home and start making money right away.
You can learn to trade stocks online to maximize your profits and minimize your losses.
And, there are many stock trading websites to choose from, so you can find the right one to fit your needs. Here are the top websites to help you get started.
Online Trading explained
Online trading can simply be defined as the act of buying and selling financial assets such as forex, shares, commodities, mutual funds, cryptocurrencies via online trading platforms. The difference between online trading and traditional trading is quite a few. To begin with, online traders do not have to interact with any other entity besides the broker they deal with. Secondly, all trading activities are done online and not physically.
Basic terms of online trading
There are certain terms synonymous with this type of trading that you should know about before you even start. These terms are terms you will often come across on whichever trading platform you pick.
Margin
Margin is another term for borrowed funds. The standard practice for stockbrokers is to offer traders some extra amount of money to trade based on the equity stock that they own. Margin allows you to buy stocks that you couldn’t afford on your own, so it is a way of increasing your investment. However, it also increases your risk.
Leverage
Leverage is similar to Margin, the difference being the amount a stockbroker offers you to boost your trading account for open trade. For example, it may be your intention to open a trade with $10, but you can leverage an extra $5 from your broker to boost your trading amount. If the trade ends up being successful, you make profits off your investment amount and the leverage amount given to you by the broker. However, leverage also carries a huge level of risks as well.
Options
Options are special contracts between sellers and buyers that give traders the obligation to buy or sell a stock at a predetermined price at a future date. Options can be a call option, an obligation to buy, or a pull option, an obligation to sell.
Futures
Futures are contracts between two parties that give one party the right to sell or buy an underlying asset at a particular price and a particular date. Unlike Options which is an obligation, Futures confers rights on the holder of the contract.
Securities
Securities is another name for assets that are traded in a platform. There are different types of securities like derivatives, debt securities, or equity.
Bid
A Bid is a two-way quotation of price for an asset. One by the seller and the other by the buyer. The higher price is always the one quoted by the seller, while the lower price is quoted by the buyer. In between both prices is a spread trade that involves buying and selling a security and related security.
Stop Loss
Stop Loss is an instruction by a trader to the broker asking them to limit their trading losses on an asset once it reaches a particular price.
Who is a stockbroker?
A stockbroker is an agent who facilitates the buying and selling of securities online. The broker provides a trading platform that can be accessed over the internet, and through their platforms, traders can execute trades. To trade on online platforms, you need to open a brokerage account with the stockbroker and fund it with a minimum trading amount.
What are the different types of stockbrokers?
There are different types of stockbrokers, but they are majorly classed into two broad groups. We have discount stockbrokers and full-service stockbrokers. Before we move on to review the best stock trading websites, let us explain the difference between both for your clear understanding.
Discount Stockbroker
A discount Stockbroker allows traders to buy and sell securities via their platform. These brokers have platforms with advanced features for simplified trading. They only operate online and give traders ultimate control over their trading activities. One of the main differences between discount and full-service brokers is that they are much cheaper to trade with as they offer zero commission trading to account holders. If you are a beginner and don’t want to spend too much on service fees, a discount stock broker is your best bet. They only operate online.
Full-Service Stockbroker
A full-service stockbroker is the traditional broker we all know. Full-service brokers have an office where they physically transact the buying and selling of shares. They are called full service because they help traders fill order forms, give professional advice about the type of securities to buy or sell, and general investment advice. Unfortunately, these brokers are more expensive because they charge high fees for their services.
In recent times, they have become less popular due to the rise of online trading platforms. However, they are still important, especially for high net worth investors, who trade securities in huge volumes.
How to use an online stock trading website?
All stock trading websites have their unique model of operation, which users must follow. However, most of them follow this procedure.
- You sign up to the platform using your email address
- Complete your account registration using your home address, SSN, and phone number
- Pick your preferred account (Joint or Individual account, Cash/Margin)
- Provide more information about your trading and financial experience
- Verify your account
- Fund your account
- Start trading
Best Stock Trading Websites for Beginners
Now, let us look at the best stock trading websites for beginners. However, do note that some of these brokers also have apps alongside their websites so that traders can access their platforms via the apps as well.
TD Ameritrade
When discussing the best stock broking websites for beginners, TD Ameritrade is one website that will make the list of many. This platform is not only a trading platform but also a guide to help beginners brush up on their trading skills. There is a large portfolio of resource materials as well as over 200 instructional videos you can watch. From tutorials to trading techniques, TD Ameritrade has it all.
The broker has an active social media presence and operates two mobile apps, namely, TD Ameritrade Mobile Trader and TD Ameritrade Mobile. As a result, you are free to ask even the most mundane questions, and you will be answered in no time. Even better is the fact that you don’t require a minimum trading amount to activate your account.
E-Trade Financial
E-Trade Financial is another very good stock trading website for beginners. Although it has been active for a very long time, the owners of the platform have continually upgraded the features to make it easier for beginners to start trading as soon as they open their accounts. E-Trade allows you to fund your account directly from the mobile app, and you can execute trades without following complex rules. The complex procedures common with other websites are absent on E-Trade.
You can also improve your trading skills by leveraging the videos and resources provided by the broker. All it takes is a minimum trading deposit of $0 to get started. Let’s also add that E-Trade has a mobile app called Power E-Trade.
Ally Invest
Ally Invest is not as popular as other Websites on this list, but it is equally a very good starting point for beginners. This broker had a name change after the platform was bought and changed from TraderKing to Ally Invest. An affiliate of Ally Bank, Ally Invest is a good platform for the buying and selling of securities. The customer service is one of the best there is, and funding and withdrawal are easy using multiple channels.
Account activation requires a minimum trading amount, and moreover, traders get quotes that they can use to make trading decisions. Therefore, in terms of ease of use, it is one of the best platforms for beginners.
Merrill Edge
Merril Edge is a website that belongs to the top US Bank, Bank of America. If you are a current customer of the bank, you will enjoy using this platform all the more since you can withdraw and fund your account with ease. Their mobile app is very good, and the advanced features are fully integrated to boost user experience. In addition, Merril Edge has an abundance of educational materials, and there is no minimum account funding requirement.
Robinhood
Another very good website is Robinhood. This platform is relatively new, but it has amassed quite the following in recent times. One reason why Robinhood is so popular with beginners is that it is perhaps the only stock trading website that offers traders free trades. What does this mean? Well, Robinhood gives you $1000 free trading cash once you make a deposit.
The only downside with Robinhood is that you don’t get to enjoy a catchment of educational materials like the others; however, for a monthly fee of $5, this broker will provide you with a special MorningStar report of 1700 publicly quoted companies. You also get access to their margin trading. The minimum balance to open an account is $0.
Charles Schwab
Charles Schwab is an online brokerage website that has come a long way. It used to be one of the very first sets of discount brokers, and today, the platform has a full range of trading features that first-timers can get a hang of within a very short time. Although you don’t need to fund your account to open one, Charles Schwab gives new traders a $100 tip for a $1000 deposit or if you use the referral code of an existing customer.
Fidelity Investments
Fidelity is a fantastic option for beginners who want speedy customer services and an efficient platform for trades. You can get in touch with their customer service over the phone during working hours. In Fidelity Investments, there are webinars, tutorials, and articles that cover every area of stock trading. So if you are new to stock trading, rest assured that your trading skills will improve maximally because of the treasure trove of materials on the platform.
The site is very easy to use, and page navigation is seamless. What’s more? Account activation is now free of charge, and account funding and withdrawal are very easy.
What to look out for when picking a stock trading website?
Choosing a very good stock trading website is not very easy, especially if you have very little experience in stock trading. Even with the list of best websites reviewed in the previous section, we understand that it can be challenging to actually pick one from the list solely at face value. So, to help you make the best decision, here are some of the factors to look out for when shopping for a trading website.
Cost implication
Online stockbrokers charge commissions for using their platform. While it is free to use many of these platforms, traders are charged commissions for trading assets like mutual funds, options, and many other assets. The commissions are just a fraction of a fee, but you pay all the same. When searching for a broker, review their fees and be sure that you can afford them before you open an account with them
Minimum Deposits
Another thing to take note of is the minimum deposit. As a first-time trader on a platform, there is a minimum amount you are supposed to deposit into your account to start trading. Some brokers will demanddeposits as low as $50 or as high as $100. Only go for a broker whose deposit requirement is one you can afford. But do note that minimum deposit requirements are not the same as account opening requirements. Deposit requirements are just the minimum amount you can deposit into your account.
Asset Portfolio
Check to see if the stockbroker offers assets you intend to trade. For example, if you want to trade Futures, make sure the broker offers Futures as a tradeable asset on their platform. Beyond that, you want to make sure that the broker offers a variety of assets just in case you intend to mix things up rather than trade on a particular asset all the time. Also of importance is the availability of low-cost assets that attract no fees when you trade them.
Features
What kind of features does the platform have? Are they easy to use and advanced enough? The last thing you want is to trade on a platform that is difficult to understand as a beginner. Fortunately for you, all the Brokerage websites reviewed in the previous paragraph are very easy to use and help beginners improve their trading skills on time.
Support
Support features like research publications, news releases, and educational resources are vital to your training. You also want to make sure that the broker’s customer service channel is active and responsive. The last thing you want is to trade with a broker that takes several weeks to respond to your inquiries or complaint.
Note: There is no golden rule when it comes to choosing a stock trading website. All we can advise is that you only go for one that offers you the best value and is very easy to use.
Other important consideration
There are some other important considerations to take note of when looking for a stock trading website. We want you to start your trading journey on a bright note in the best possible way. So here are very important tips
Safety of your investment
You have to be sure that your investment will be safe with the broker, which is not hard to know. First, check if the brokerage website has SIPC protection worth about $500,000 as required under US law. If the broker is not a US website, still check for protection safeguards of any kind. The higher the protection ceiling, the higher the protection you get. Another thing you want to be sure of is the type of security architecture the website has. Make sure the system has advanced features to keep your investment safe. Advanced security features prevent hackers from stealing your identity of funds.
Licensing
Is the stockbroker licensed? If it is, how many licenses do they have? We recommend tier 1 or tier 2 websites that hold licenses issued by one or more government regulators. Tier 1 traders have three or more licenses, while tier 2 brokers have one or two licenses. Avoid using websites that are not regulated by any government regulator. Doing that is at your own risk.
Funding/Withdrawal method
Another thing to consider is the ease of funding or withdrawal. The best websites offer you multiple funding and withdrawal methods. Make sure the method you prefer to use is available on the website. Common withdrawal and funding methods are
- Wire transfers
- Online payment platforms
- Cheques
Types of Stock brokerage accounts
There are different types of brokerage accounts, so knowing their differences is very important as this will help you pick the right one. Here they are.
Cash account: The stock trading websites reviewed in this article offer cash accounts to customers. To operate this type of account, you will have to pay the full price for the securities traded. Traders pay for securities on selected days.
Margin account: This type of account is different from a cash account. For margin accounts, the broker lends you money to purchase the securities, and the funds attract interest. Thus, margins increase the earning potential of traders but also the risk of suffering significant losses too.
Retirement Account: A Retirement Account is meant for different types of IRAs and different types of retirement accounts.
Stock trading terms to know
Here are some basic stock trading terminologies you should master since you will often come across them.
Stock
A stock is a singular unit of shares offered up for sale by a company and traded in the stock exchange. Also called equity, stockholders have ownership of a company proportionate to the number of shares they hold. They also share part of the earnings of the company.
Market Capitalization
Market Capitalization, or Market Cap as it is often called, is the total monetary value of shares of a company that are actively traded in the stock market. To arrive at a company’s market cap, you multiply the number of shares by the price per share.
Price-to-Earning ratio
The price to Earning ratio is the valuation of a share based on the price relative to its earnings per share. This technical term is commonly used for stock valuation purposes.
Dividend
A dividend is the distributed profit of a company to its shareholders at the end of the year. Shareholders get dividends relative to the number of shares that they own.
Exchange-Traded Fund
Also called an index fund, these are different types of securities merged up into a single portfolio. A portfolio can have stocks, futures, and options.
Limit Order
A Limit Order is an instruction issued by the trader to a broker to buy or sell a security at a particular time for a predetermined price. Under such an instruction, the broker will not sell the security until the time and price conditions are met.
Bond
Bonds are issued by governments and bought by investors. These assets have a set date for redemption, and they carry significant interest rates that the issuer (government) must pay alongside the invested amount. As a beginner, this Security is not one you should concern yourself with because bonds are very expensive and only meant for big-time investors.
Market Order
A market order is another type of instruction issued to a broker by an investor or trader asking the broker to sell their securities at the best possible price on a set date. This method is the safest way to exit a trade with minimal losses.
Mutual Fund
Mutual funds are very popular assets found on many stock trading websites. A mutual fund entity pulls together funds from different investors and trades with these funds to make the highest profit possible. At maturity, investors are rewarded based on the value of their investments.
Trading Risks to be mindful of
To conclude this article, let us review common risks to be mindful of when trading stocks. As with all economic ventures, stock trading has its own risks, and knowing them will help you protect your investment, especially if you are a beginner.
Stock Trading look easy, but it isn’t
Modern trading platforms have made it easy for everyone interested in trading stock to start trading in a matter of days or hours, as the case may be, unlike in the past when it required a lot of hard work and training. While the growth in technology has simplified the process, it has also created a proverbial banana peel for inexperienced traders. A single click of a button can lead to irreversible losses. Likewise, reading a chart or data wrong can have a consequential impact on your fortunes as a trader, so you need to be very careful.
You can earn a lot of money trading stock, and you can also lose all you have. Therefore, discipline and concentration are just as important as training. While it seems easy on the surface, stock trading is not in real life; otherwise, everyone will be doing it.
Internet dependency
Online trading is dependent on the internet, so the slightest interruption of your connection can lead to losses. Unfortunately, this is a very common challenge many traders face. This is why new traders are advised to only use a strong and trusted broadband to trade stocks online. For fast-moving trades, every second counts, so take heed that you avoid trading actively if the connection is poor.
Risk-taking is a risk
Risking physical cash is the same as risking virtual cash, but the latter is much easier than the former. For example, if the only way to trade stocks were to do it the traditional way, you would think twice before buying or selling an asset. But with your money in virtual form and deposited with a broker, investing becomes so easy. Furthermore, the presence of leverage may cause you to take risks that you would not take if there were none. Leverage is like an apple dangling at the edge of a weak branch. Although the apple may be within reach, there is also the possibility that you may crash and burn.
Many beginners fall into the temptations that a broker’s leverage offers. The possibility of earning 100 or 200 times more than their Investments makes them risk all, and they end up with zero equity at the end of the day. So our advice is very simple; use leverage wisely and avoid using them at all if you don’t want to expose yourself to potentially significant losses.
Everyone is an expert
Another risk when it comes to trading stocks is the possibility of taking the wrong advice. When it comes to online trading, everyone is an expert, and every strategy seems like the right strategy to use. However, as a beginner, it can be very confusing when looking for the right advice online. What you should know, however, is that most of the advice you see online is either misplaced or garbage.
To protect your investment, only seek advice from authoritative websites, and even then, research the information extensively before adopting it in live trades.
Conclusion
There are so many stock trading websites online, and in this article, we have been able to identify the best ones for beginners. Before you decide on a broker to go for, do your due diligence and ensure that they offer all the facilities you require to make your stock trading venture a successful one.