What Do I Need to Start?
Curious on how to start trading? You don't need a big budget or some degree on finance to start. What you do need is a clear goal, time commitment to learn the basics, a regulated broker, and a budget you can afford to lose.
In this guide, we'll explain how trading differs from investing, help you decide which approach fits your goals, and walk you through seven practical steps to place your first trade with confidence.
One thing to keep in mind before you go further: trading carries risk, and prices can move against you quickly. Learning the process step by step is the best way to make informed decisions from day one. This guide is not an advice to buy, sell, or make financial decisions.
Trading vs Investing: What's the difference
Trading is buying and selling investment instruments such as stocks, bonds, commodities, foreign exchanges, or others, with the goal of making profit in the short term. People who do this kind of trading will employ strategies, and hope that they outperform the market on a daily, hourly, even minute-basis. Traders who rapidly buy and sell securities in a single trading are called day traders.
On the other hand, investing means you are holding your instruments longer, hoping that the value will increase over years or sometimes decades. In certain cases, you can also earn dividends from your investments, which can be paid quarterly (most common), monthly, or sometimes on special occasions by the company you are investing in.
Which One is Right for You?
Sure, trading looks very interesting. Yet, we should start with the question: what do you want to achieve by trading, and how much effort are you willing to put in? Generally, trading (especially day trading) carries more risk due to volatility and the amount of decisions you have to make. Investing, in general, carries lesser degree of risk with slower pace of gain.
If you love technical analysis, crunching numbers, and willing to monitor the market around the clock, you may have what it takes to learn and practice day trading.
How to Start Trading in 7 Steps
Step 1: Set your goals and time commitment
Do not rush putting your money into an account, or looking at charts. Start "with the end in mind". Do you just want to learn investing, or do you plan to go full-time? This will dictate which trading style fits you, how much money you put in, and how much time you need to set aside.
There are three questions you can use:
Why do you want to trade? Do you just want to try and learn, do you want to complement your skills in investing, or are you planning to make a living out of trading in the future? This will determine the kind of strategy which suits you.
How much time can you commit each week? Commit your chosen time to learning, researching, and watching your assets' positions. Once again, be humble and do not overestimate your capacity, since it will only hurt your decision making in the end.
How do you want to progress? In your first months, it is wiser to measure process instead of profit. For example: "I will practice trading in demo mode" or "I will pick my own stocks and limit my losses to X percent". Only then, you can evaluate your results and judge which strategy fits which situations.
Once you know your goal and your available time, you can pick a trading style that suits you:
Trading style | How long you hold a position | Time commitment |
|---|
Day trading | Minutes to hours, closed before the market closes | High: you need to watch the market real-time |
Swing trading | A few days to a few weeks | Medium: daily checks and analysis |
Position trading | Weeks to months | Lower: checking positions every once in a while |
If you trade US stocks from Southeast Asia, factor in the time zone. The regular US market session runs from 9:30 a.m. to 4:00 p.m. Eastern Time, which is roughly 9:30 p.m. to 4:00 a.m. (or 10:30 p.m. to 5:00 a.m., depending on US daylight saving time) in Southeast Asia.
Day trading US stocks from this region means you must be active late at night. If that doesn't fit your work and sleep schedule, swing or position trading may suit you better. Write your goal and weekly time budget down. You'll come back to them in the next steps when you choose a broker, set your starting budget, and decide how much risk to take on each trade.
Step 2: Learn the basics
You want to treat trading as a serious side job, hence you need to commit to learn the foundations. Most brokers (or trading apps on your phone) have free tools for you to simulate trading with real market data, using virtual budget.
Before you put real money on the line, learn the language of the market and how an order actually gets filled. Below are some of the core concepts you need from the start.
Know what you're trading
Stocks: a stock or share is a small slice of ownership in one company. Its price moves with, generally: the company's results, the news, and overall market sentiment.
ETFs (exchange-traded funds): a fund that holds a basket of assets. For example, there are 500+ companies bundled in the S&P 500, and it trades on an exchange just like a single stock. Because one ETF spreads your money across many holdings, it is a common starting point for beginners.
Fractional shares: some brokers let you buy part of a share instead of a whole one, so you can trade high-priced stocks without breaking the bank.
Understand how prices work
Bid, ask, and spread: a 'bid' is the highest price a buyer is willing to pay, and the 'ask' is the lowest price a seller will accept. The gap between them is called the 'spread'
Liquidity: liquidity means how easily you can buy or sell. Largely traded stocks usually have narrow spreads, and you will have easier time selling.
Volatility: it shows how much the price of stocks swings. Higher volatility means bigger moves in both directions, which carries more risk and reward.
The two (main) ways to analyze a trade
Fundamental analysis: you can manually read financial reports, analyze revenue, earnings, debt, and growth outlook. It helps you judge what a company may be worth.
Technical analysis: looking at price charts and trading volume to spot trends and patterns. Most short-term traders rely on it to time their entries and exits.
One note: since May 28, 2024, most US stock trades settle on a T+1 basis. This means the trade is officially completed one business day after it is executed, under a rule set by the US Securities and Exchange Commission (SEC).
Step 3: Choose a reputable broker
Your broker is the company that holds your money, executes your orders, and keeps your shares on record. Choosing the wrong broker may cost you money via hidden fees, poor execution, or even losing access to your funds.
Make sure your broker is licensed
Before you compare fees or apps, make sure confirm the broker is licensed by a financial regulator in the country. Check their legalities this way:
Find the name of the legal entity you would be opening an account with. It is usually listed in the website footer or the terms of service.
Search for that entity on the regulator's public register. For US broker-dealers, that is FINRA BrokerCheck.
Make sure the licensed entity on the register is the same company that will hold your account, not just a partner or a parent company.
Important: If a platform promises guaranteed profits, fixed monthly returns, or pushes you to deposit quickly, it is a huge red flag. No regulated broker can promise you a return.
Compare the costs
Some brokers market their products with words such as "Zero commission". Read the broker's fee schedule and look at the full picture to estimate your cost:
Item to check | Reason | Question to answer |
|---|
Trading fees | Small fees add up quickly when you trade often | Is there a commission or a flat fee per trade? |
Spread | Some brokers earn from the gap between the buy and sell price instead of charging a commission | How wide is the spread compared with the live market price? |
Currency conversion | If you fund your account in your local currency, converting to USD has a cost | What exchange rate and conversion fee apply on deposits and withdrawals? |
Deposit and withdrawal fees | This fee easily adds up over time | Are there fees or minimum amounts to deposit or withdraw? |
Inactivity or account fees | Some brokers will charge you for not trading | Is there a monthly fee or a charge after a period of inactivity? |
Check if your platform trades the products you want
Having an account will be useless if it can't be used to buy the stocks and ETF that you want. Can you trade the stocks and ETFs you are interested in? Are there charts, company data, or a demo mode so you can practice before you use real money?
Check reviews on customer support
Do people complain often? Can you reach a real person when something goes wrong with a deposit or an order?
Regulated brokers are required to verify who you are before you can deposit, so you will need your ID. Verification can take multiple days.
Step 4: Decide how much to start with
There is no minimum amount that makes you a trader. The right starting budget is the amount you could lose in full without it affecting your bills, your savings goals, or your sleep.
Avoid borrowed money
Some brokers offer margin, which lets you trade with money borrowed from the broker. As a beginner, trade only with your own cash until you have a track record and a written plan you actually follow. This will prevent you falling into debt.
A good rule of thumb for a total beginner would be: "how much do I spend on my fanciest dinner?", as that will usually be a safe amount to learn with. Treat it as your first bankroll.
Step 5: Pick your first stocks or ETFs
Start with what you know
Never buy anything that you don't understand. Do you know how the company makes money and when will its share price fall? If you can't, don't buy it. Many beginners start with businesses such as apps, brands, or services they use every day. Knowing a product is not the same as knowing the stock, but it gives you a head start when you read the company's results and news.
Single stocks or ETFs?
You can pick one or do both, but in a nutshell, here are their perks:
Factor | Single stock | ETF |
|---|
What you get | A slice of one company | A slice of a fund that holds many assets |
Risk Management | None on its own: one company's bad news hits your whole position | Built in: one holding's drop is cushioned by the rest of the basket |
Research needed | High: earnings, debt, competitors, and company news | Lower: what the fund tracks, what it holds, and what it costs |
Ongoing cost | No fund fee, only your broker's trading costs | An expense ratio: a yearly fee charged by the fund as a percentage of what you hold, on top of trading costs |
Price movement | Can swing sharply on a single earnings report or headline | Usually moves less than a single stock, though sector or theme ETFs can still be volatile |
Important: There is no such thing as a risk-free investment. A broad-market ETF can still fall sharply when the whole market does, and a narrow theme ETF can behave much like a single stock. Know your limits and manage your losses.
What to do before you buy?
For each stock or ETF you're looking at, check these before you place an order:
For a stock: do your due diligence, and read the latest quarterly financial report if possible. Revenue, earnings, and debt are the main things that will drive the value of a company.
For an ETF: check its performance in the last few months or years, especially through moments of bad news, dips, and crisis. See if you like how they hold up.
For both: look at the average trading volume. Heavily traded names are easier to enter and exit at a fair price, so you will not be stuck when you want to cut the loss.
Note: US-listed companies file their reports with the SEC, and you can read them for free on the SEC's EDGAR database. An ETF's holdings and fees are listed on the fund provider's website and in its prospectus.
Don't put all your money in one basket
Spreading your budget across a few holdings, or using an ETF as your core position, means a single bad result won't wipe out your account. It keeps one mistake from becoming your whole outcome while you are still learning.
Cautions
Do not blindly follow "trading signals" or free advice from social media, even news. Make sure you understand the analysis behind every purchase.
Do not buy a stock only because it is in hype.
When you have a stock or two that you understand and like, you are ready to place your first order.
Step 6: Place your first order
For most beginners, a limit order is safer. You set the highest price you are willing to pay, so you won't be paying anything more than what you set. If the price never reaches your limit, the order simply doesn't fill, and you can review it and decide again. Pick your stock or ETF, set your price, and place the bid.
After your order goes in
Check the order status. It will show as filled, partially filled, or still open. A limit order can stay open for hours or expire unfilled, which is normal.
Cancel or change an open order if your plan changes. You can usually edit or cancel an order that hasn't filled yet. Once it fills, the only way out is a new sell order.
Confirm the details. Compare the fill price, the number of shares, and the fees on your confirmation with what you expected. As covered in Step 2, the trade settles one business day later (T+1).
Step 7: Manage risk
You want to limit each loss, so your total profit is greater than the total loss. This will prevent one losing trade, or a series of them, from knocking you out of the market. A rule of thumb is to risk no more than 1% to 2% of your trading account bankroll on any single trade.
Limit your loses with stop order
A stop order (often called a stop-loss) turns your planned exit into an order that sits with your broker, so you don't have to manually sell your stocks. There are two common versions:
Order type | What happens when your stop price is reached | Trade-off |
|---|
Stop order (stop-loss) | always sells at the next available price | the price can be lower than your stop |
Stop-limit order | sells only at your limit price or better | the order may not fill if the price drops lower than your limit |
A stop-loss can help limit losses, but neither version guarantees your exit price. Place your stop where your loss percentage is starting to get bigger than your average profit. Check which stop order types your broker supports, and whether they work in pre-market and after-hours sessions.
Plan where you will take profit
This one is pretty much self-explanatory. As you get more experience, you should have more knowledge on when to hold stocks while it's rising, and maximize your profit without getting too greedy.
Set a limit for when to stop
Set a loss limit for the week or month. If your account falls by an amount you decided in advance, stop opening new trades and review your strategy.
Don't move your stops. Be disciplined in cutting losses. Bad decision turns a small, planned loss into a bigger one.
Review every closed trade in your journal. Did you follow the plan from Step 1? Was the size right? Did the stop sit in the right place? These answers improve your next trade more than any single result.
