How to Trade Stocks

Learning about how to trade stocks is necessary to prosper through stocks.

Trading stocks in Canada is a relatively simple process but readers should be aware and cognizant of various factors. First, of all, you should consider whether you are sufficiently liquid to risk your capital.

Consider an Emergency Fund
Before opening an account and risking capital, it is probably best if make sure you have a cash cushion to cover unforeseen expenses. Consider keeping up to a year’s worth of salary in cash or cash equivalents on hand if you think there’s a good chance you’ll need it–reasons include chronic health conditions, plans to have children, or employment in a extremely unstable industry (like journalism).

Open an Investment Account
Before opening an investment account, it’s important to ask yourself what sort of investments you want to own. If you want to buy stocks and exchange-traded funds, you’ll need a brokerage account. Online brokerages are a good place for many new investors to begin. Most offer low costs and lots of educational tools. If you have a fairly low balance, make sure you won’t get clipped for maintenance charges or other monthly fees. If you plan to trade frequently, look for a firm that offers low trading commissions (read more about choosing a broker).

Once you’ve transferred money into your brokerage account, it’s time to start building your portfolio. You are then ready to trade stocks listed on the various stock exchanges.

Remember the topics in our discussion of stock trading basics.

Numerous studies indicate that investors who set up a desired asset allocation and focus on maintaining it at a rock-bottom cost tend to outperform those who swing for the fences and incur high expenses and taxes as a result.

Happy investing!