Stock trading is simply the buying and selling of stocks (shares) of a specific company in order to make a profit. Think of stocks as small individual pieces of a company. If you own stocks you own part of that company. Stock values change with each sale, depending on whether more people are buying (because they think the price will rise) or selling (because they think it will fall).
How do I make money trading stocks?
Here’s an example: A company is trading at $5 per share on January 1st and you buy 100 shares for a total of $500. By February 1st, the shares are trading at $5.50, so you decide to sell your shares, giving you a 50-cent return on each share for a profit of $50. This also works in the opposite direction: If the stock price was $4.50 when you decide to sell, you’d be losing 50 cents per share for a net loss of $50.
WATCH: How does the stock market work?
How do I start trading on the stock market?
Newbie investor? Never placed a trade before? Don’t worry, it’s never been easier to start trading. You simply choose a stock trading platform, open and fund an account then make your trades. Check out our guide for how to buy stocks online to get started.
Our selection of top picks is based on the same criteria as our annual Stock Trading Platform Awards. This is updated yearly to reflect changes in the market.
"Best for" picks are those we've evaluated to be best for specific product features or categories – you can read our full methodology here. If we show a "Promoted" pick, it's been chosen from among our commercial partners and is based on factors that include special features or offers, and the commission we receive.
This isn't an exhaustive list of all the trading platforms out there. What's best for you depends on your own investing strategy, budget and financial goals.
Is it free to sign up for a stock trading account?
Most stock trading platforms don’t charge anything to open an account and start trading. But you may have to pay monthly fees to access advanced research tools. There are 2 main types of stock trading fees:
Trade fees (commissions). A fee charged every time you buy or sell securities. Trade fees for online brokerages typically range from under $5 to $10 per transaction. Options contracts typically come with an extra fee of $1 to $2 per contract.
Account maintenance and inactivity fees. Some brokerages charge periodic account fees (often around $25 per quarter) that are waived with a minimum balance or by making a certain number of trades per quarter.
How long does it take to open a stock trading account?
Most online brokerage applications can be completed in 10 minutes or less. Identify verification can take anywhere from several minutes to several days depending on the system your broker has in place (machine driven verification is faster than manually reviewing documents).
Once your application is submitted, it typically takes 1-2 business days to get approved. Before you can start trading, you’ll need to fund your account, which can take another day or 2 depending on the transfer method.
Where do you trade stocks?
Traders buy and sell stocks throughout the trading day on the TSX, NYSE, Nasdaq and other exchanges around the world. Here are some of the world’s biggest stock markets by market capitalization:
Stock exchange
Short name
Market capitalization
New York Stock Exchange (US)
NYSE
US$25.62 trillion
Nasdaq (US)
NASDAQ
US$19.51 trillion
Hong Kong Exchanges
HKEX
US$6.76 trillion
Shanghai Stock Exchange
SSE
US$6.56 trillion
Japan Exchange Group
JPX
US$6.54 trillion
Here is a map of some of the world’s biggest exchanges
7 tips for beginner investors
Know your risk tolerance. Figure out what level of risk you can manage. Your personal risk tolerance should dictate which investments you choose.
Do your homework. Research the financial health of companies, review annual reports and follow the news. Get familiar with popular indices like the S&P 500. Use the research tools provided by your online trading platforms or use market research websites like Bloomberg or Yahoo Finance.
Buy what you know. Begin investing in industries and businesses you understand or that produce products that you use everyday.
Diversify. Spread your investments across a range of industries. This is called diversification — a fancy way of saying: don’t put all your eggs in one basket. You can be better protected against losses if one particular industry experiences a sharp downturn.
Explore blue-chip companies.Blue-chip stocks are issued by big, established companies. They’re typically a source of reliable returns and minimal risk.
Consider index funds. Index funds, like ETFs and mutual funds, offer you a way to invest in multiple companies at once rather than in just one company’s stocks. You invest in the shares of the fund instead of all the individual companies themselves that make up the fund.
Practice new strategies. Play stock trading games to master your craft. Or take an online trading course to advance your knowledge about different trading strategies.
Stock trading strategies you should know
This the most common type of trading is where investors buy and sell company shares through stock markets and then monitor continuous updates on the prices of those shares. The value of a company’s shares changes daily, so shareholders aim to buy shares when they cost less and sell when they cost more to make a profit. You can expect transaction fees for buying and selling.
Example: Company X is trading at $5 per share on January 1st and you buy 100 shares for a total of $500. By February 1st, the shares are trading at $5.50, so you decide to sell, giving you a 50-cent return on each share for a profit of $50. This also works in the opposite direction: If the stock price was $4.50 when you decide to sell, you’d be losing 50 cents per share for a net loss of $50.
Options are essentially a bet on how you think a stock will move within a set time. If you purchase a contract of 100 shares, that gives you the right, but not the obligation, to buy or sell a stock at a certain price, called the strike price, within a certain time frame. Here are 2 options:
Call. If you believe the price of a stock will go up by the expiry date, you buy a call option contract. This gives you the right to buy shares at the strike price. If the share price is higher than the strike price, either buy the shares at a discount when the contract expires or buy and immediately sell the option for a profit.
Put. If you think the price of a stock will go down by the expiry date, buy a put option contract. This gives you the right to sell the shares at the strike price. If the share price drops below the strike price, you could buy shares at market price and sell them at the strike price.
Example: Company Y is trading at $20 per share on January 1st and you can buy a 6-month options contract with a strike price of $20 and a premium of $5 per share.
If you expect the market price of the share to reach $25 — the strike price plus premium — or higher by the expiry date, buy a call option. Since this contract gives you the right to purchase the stock at the strike price, you could either sell the contract for a profit or purchase shares at below market value.
However, if you expect the market price of the share to drop to $15 — strike price minus premium, or below — by the expiry date, buy a put option. This contract gives you the right to sell shares at the strike price, meaning you could either sell your contract for a profit or purchase the shares at market value and sell them for more than you paid.
Bonds are issued by companies or governments to generate cash flow, finance debt, fund investments and more. Bonds have predetermined term lengths and pay interest (also called the coupon rate) at set intervals for the length of the term. Once the bond reaches maturity, it can be cashed for the principal amount.
Example: Company A is looking to raise money for the development of a new product, so it issues 5-year bonds with a $1,000 principal and 5% coupon rate, paid annually. If you purchase 10 bonds for a principal investment of $10,000, you’ll receive a $500 interest payment each year until the bond reaches maturity. After 5 years, you would have accrued a total of $2,500 of interest on an initial investment of $10,000.
Foreign exchange (forex) trading is the process of buying and selling currencies. Unlike the stock market, the forex market is not one central exchange but rather a network of transactions between traders. In this market, buyers purchase one currency in exchange for another. Since exchange rates change throughout the day, traders are able to make money by buying low and selling high, just like the stock market.
Example: Say you hold US dollars. The Canadian dollar is trading at $1.35 against the US dollar, and you expect the value of the Canadian dollar to increase. You sell $10,000 USD in exchange for $13,500 CAD. Later that month, the exchange rate drops to $1.30 CAD/USD, meaning that it now costs $1.30 Canadian to buy one USD. If you decide to sell, you would make a profit of $307 USD.
Futures are based on buying or selling stocks in the future with an agreement to buy or sell the stock. When you enter into a futures contract, you’re making an agreement to buy or sell an asset at a set price on a certain date. Check out our guide on futures trading to learn more.
Swaps are an agreement between 2 parties to exchange currencies at the spot rate. They are done as over the counter transactions between traders, businesses or financial institutions. In most cases, one cash flow is fixed, while the other is variable, often based on a benchmark interest rate, floating currency exchange rate or index price.
Example: Company A loaned one of its distributors $1 million over 5 years with a variable annual interest rate of 1% + 5.25% prime rate. The company believes that the prime rate is going to decrease within the next 5 years, affecting its interest payments. It wants to enter into a swap on its loan. Company B believes the interest rate will rise, so it pays company A a fixed rate of 7% per year in exchange for the variable cash flow from A’s loan. Company A is happy if prime stays below 6%, whereas company B is happy if prime goes above 6%.
CFDs, or contracts for difference, allow advanced traders to profit from the change in price of underlying assets like stocks, stock indices, currencies, commodities and more. Similar to swaps, the underlying asset does not actually change hands. In this type of transaction, the trader buys or sells a contract with a specific number of units of a particular instrument. If you buy a CFD and the price of the underlying asset goes up, you earn money. If you buy a CFD and the price goes down, you lose money.
Example: Stock XYZ is trading at $5 per share and you buy a CFD of 100 shares. The price of XYZ goes to $5.25 per share and you sell your position, earning you 25 cents per share or $25 in total. However, if the price dropped to $4.75, you would have lost 25 cents per share for a net loss of $25. While you won’t actually be purchasing the underlying assets, brokers may charge a commission on CFDs or require you to buy and sell slightly above or below market price so that they can profit.
Cryptocurrency trading is very similar to stock trading in that it involves buying or selling assets to make a profit. Just like stocks, there are numerous cryptocurrencies allowing you to choose where to invest your money. Once you purchase cryptocurrency on an online exchange, you can either sell it, hold on to it, or buy other assets like stocks, other cryptocurrencies or even goods and services.
Forwards trading is just like futures trading but with more flexibility. While futures contracts include a set number of a specific asset at a predetermined delivery date, forwards contracts allow you to customize the terms. The contract holders make an agreement to buy or sell the asset, aiming to make a profit by predicting price movements.
Short selling is a bet that a stock price is going to fall. Traders borrow shares and sell them, anticipating they can buy them back later to settle the loan at a lower price and pocket the difference. But if the share price rises instead, they have to buy at the higher price and take a loss.
Example: Company X is trading at $5 per share on January 1st and you think it will go to $0. You borrow and sell 100 shares for a total of $500. By February 1st, the shares are trading at $1, so you buy 100 shares to close your position for $100, and pocket $400. This also works in the opposite direction: If the stock price rises to $10, repaying the loaned shares costs you $1,000 and you lose $500. If the stock hits $20, you lose $1,500. The most you can gain is $500, but your potential loss is unlimited.
Risks of stock trading
Losses. No investment is risk-free and any stock, no matter its performance history, carries the risk of loss. Stock prices can fall dramatically and even drop down to zero. This can mean significant financial losses for investors.
Time. Online trading can be a time-consuming process — especially when you hand-pick each of the securities in your portfolio. The more active your trading strategy, the more time you’ll need to be ready to invest in monitoring the performance of your stocks and staying abreast of impactful market news.
Stress. The stock market is always moving and can be volatile — a significant source of stress for those with investments that hinge on its performance and direction. If you can’t weather the ups and downs, you might be better off pursuing a more passive investment strategy, like a robo-advisor or managed portfolio.
Market events. Even after thoroughly researching a company, you can’t predict the future. Natural disasters, terrorist attacks, pandemics, bad company news and even changes in government policy can all occur unexpectedly and adversely affect the price of shares.
Lack of expertise. While investing in the stock market sounds easy in theory, it can get quite complicated if you don’t know what you’re doing. First-time investors should exercise caution while building their portfolio.
How do I learn more about stock trading?
One of the best ways to grow your stock trading skills is to study financial news, company announcements and market activity. Stay up to date with anything related to the industries or companies you’re interest in as well as the economy overall.
Consider taking an investment course from sources like Udemy, Morningstar’s Investing Classroom or Skillshare. Many such courses are often taught by experienced professionals with years of knowledge. Make sure you choose a trusted educational or training organization.
Bottom line
Investing in the stock market has never been easier. But before you dive in, make sure you compare trading platforms and carefully research the companies you want to invest in. Get familiar with your personal level of risk tolerance and make sure you diversify your portfolio in order to minimize losses. Ready to begin?
Once you've registered for an online trading account, navigate to your dashboard to manage your account. From there, you should be able to look up various stocks and other assets. Once you've found a stock you want to buy, enter the quantity and your bid price and submit your trade.
Selling stocks is very similar. You'll find your assets in your portfolio and should be able to select a stock to manage your shares. If you want to sell, you can enter the amount and the ask price, then submit the transaction.
Yes. As long as you have a bank account, you should be able to sign up for online trading.
There are several online stock brokers that are good for beginners. Wealthsimple offers no trade fees, no monthly fees and no minimum balance requirements. Questrade offers low fees and access to many types of securities.
Beginner-friendly stock apps may not offer a full suite of advanced features but are often easy to use and competitively priced. Learn more in our guide to the best stock app for beginners.
It's simple. Choose an online share trading platform and open an account. Follow the rest of the steps here in our guide on how to buy and sell stocks online.
Most online trading platforms don't charge a fee for regular stock trading but some will charge fees for commission, so you won't have to pay unless you are making trades. Commission prices can vary, so it's important to compare the fees of trading platforms before signing up with one.
Yes, some brokerages let you open a demo account and perform fake stock trades to see how the system works. This can be a great way to decide if a platform is right for you before committing real funds.
A paper trading account (also called a demo account) allows you to make fake trades through a virtual stock exchange. Investors can practice trading strategies without putting any real money at risk.
All stock trading platforms provide ways to research investments. Many offer market insights, investment news and reports with expert analysis and recommendations. Depending on the platform you choose (and possibly on the additional services you pay for), you may be able to get expert stock recommendations.
Yes, many online stock trading platforms provide access to international stocks, or stocks sold on exchanges in the US and other countries. But not all do, so be sure to verify this before signing up for an investment account.
Yes, the most common way to borrow money for stock trading is called margin trading, which involves using your stocks or managed funds as security. It's also possible to get a loan secured by your home equity or get an unsecured loan to invest. However, this usually comes with high interest charges.
Borrowing money for stock trading is very risky given that returns are far from guaranteed. Avoid borrowing to invest unless you're an experienced investor and are sure that you can repay the loan, even if your investment fails.
It's possible to open a joint investment account with another person, but not all brokerages offer this option. Some that do include Interactive Brokers, Qtrade Direct Investing, TD Direct Investing and CIBC Investor's Edge. Check with your brokerage to find out for sure.
A market order is carried out right away at a security's current market price. A limit orders is carried out if a security reaches a specified price; the order is never executed if the price is never reached. Buyers placing a limit order specify a maximum selling price, whereas sellers placing a limit order specify a minimum buying price.
You can cancel or change an order after placing it as long as the order is still open and has not been executed (processed). But keep in mind that market orders are placed instantly, so the option to cancel or change an order will likely only apply to limit orders.
Stock trading glossary
A mixture of assets such as stocks, bonds and cash owned by an investor.
An index that measures a specific stock market and helps investors compare current and historical prices. Learn how you can invest in index funds here.
A company’s profits divided by the number of shares outstanding. A measure of profitability.
The stock price divided by the earnings per share. This ratio allows investors to compare companies in the same industry to determine if any are undervalued or overvalued.
Part of a company’s earnings that is paid quarterly or yearly to those who own dividend stock. Dividends are not guaranteed.
This refers to borrowing money to buy stocks. The margin represents the difference between the value of securities in an investor’s account and the amount of the loan. This is a risky strategy because if the value of your investment falls you will still be on the hook for the money you borrowed.
This is the first time a company issues shares for sale to the public. IPOs of well-known companies tend to attract a lot of media attention.
A mutual fund is a diverse collection of stocks that is managed by a portfolio manager whose goal is generally to get better returns than the overall stock market. Mutual funds charge an annual fee (usually a few percentage points of the total amount invested) for this service.
Day trading involves buying and selling stocks on the same day. It can be lucrative but is also very risky. As such, day trading is only suitable for experienced investors.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Jaclyn Hurst was an associate publisher at Finder. She has a Bachelor’s degree in Business from Redeemer University and a University Certificate in Management Foundations from Athabasca University. She’s as passionate about business and finance as she is about the great Canadian outdoors, organic Sumatra coffee and music. See full bio
Ryan Brinks is a former editor and publisher at Finder, specializing in investments. He holds a journalism degree from University of Wisconsin–River Falls. See full bio
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