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Trading (Buying And Selling) Stocks (Part I) — The Basics

To get you acquainted with the trading process many investment firms, thanks in part to the power of the Internet, offer you play accounts where you can practice trading stocks with make-believe money. The truth is that while these games familiarize you with the basics of trading, there is little to be learned when it comes to the psychology of investing. Your mind already recognizes this exercise as a non-consequential game, which does not really give you the true feeling of investing.

Nowadays with so many discount and deep-discount online brokers you can open investment accounts with a few hundred dollars and buy stocks. Given the little money it takes to invest in stocks, it is almost silly not to. Start investing with little money and as you build your confidence (hopefully not to the point of over-confidence) you can advance to more practical investment amounts that suit your risk levels. The only true way to learn investing is when there is real money on the table.

Opening an investment account is very simple these days.You fill out an account application and send it to your broker along with a check to be deposited in your account. Once your account has been established with your initial deposit, you are ready to begin investing. While your money sits in your account it is usually automatically invested in some type of money market fund. These funds are sometimes referred to as cash accounts, consisting of various very short-term notes (bonds) paying 3-5% interest. They are very liquid, meaning that at any given moment you have access to your cash and there is little risk associated with them. So you can see that you are already faring better than your 1-2% interest savings account. When you buy stocks you will draw on this account to pay for them, leaving less money in the account.When …