How to Trade Stocks and Make Money Like a Pro

Last Reviewed and Updated by Gabe Ross on November 26, 2023

The stock market presents a great opportunity for those who want to build wealth or earn a living from investing their money.

The problem is that not every stock investor makes money – or at least, not as much money as they want. Whether you are investing for the short-term or the long-term like Warren Buffett, you can become more successful by learning how to trade stocks like a pro.

How to Buy and Sell Stocks: Where to Start and What to Know

Investors approach stock investing in different ways. While some buy and sell shares frequently, acting like day traders, others buy shares and hold on to them for years.

The practice of regularly buying and selling shares appeals to those who choose to invest for a living. While you may make a quick profit from frequent trading, you will be subject to a higher capital gains tax rate.

On the other hand, long-term investing appeals to those looking to build wealth over time. While it may take many years before you achieve your financial goals, your profit will be subject to a lower tax rate.

Regardless of your trading strategy, short-term or long-term, you will need to open a brokerage or stock trading account to enable you to buy and sell stocks. You can open an account with online brokers for free, usually in a matter of minutes.

Which Is the Best Online Broker for You?

There are many online stock trading platforms, and the challenge will finding the right one for you.

If you are looking for free online brokers or stock trading apps, here are some of popular options:

Robinhood
Webull
eToro
Interactive Brokers
Charles Schwab
Fidelity

Here are some of the factors you should consider when selecting a stock trading app:

Broker Fees

Many online brokers now offer commission-free trading, which means you can buy and sell stocks without incurring trading costs. As a result, commission-free online brokers will save you money and bolster your chances of making a profitable trade.

While trading fees are generally going away, some brokers still have charges. Where trading fees apply, the broker may offer features that commission-free brokers lack. Therefore, it helps to evaluate broker charges and services to see what best suits your needs.

Account Minimums

The account minimum refers to the least amount of money you can start investing with. Some brokers have minimum capital requirements, which can range from a few dollars to thousands of dollars.

Other brokers will let you start investing with as little money as you can afford. For example, you may start purchasing fractional shares of stocks with as little as $1.

If you want to start investing with small sums of money, brokers with no or low account minimums may be ideal for you.

Margin Trading

If you have the right broker, you can access trading loans. For example, you may want to buy shares worth $5,000, but you only have $3,000 in your account. The broker can lend you $2,000 to enable you to complete that trade. In that case, you would be trading on margin to the tune of $2,000.

The margin trading opportunity appeals to day traders and other frequent investors. If you want to access loans to supplement your trades, you will need to choose a broker that offers margin trading.

How to Buy Your First Shares as a Beginner

After you open an account with your chosen broker or stock trading app, you can begin to construct your portfolio. It is a always a good idea to research stocks, their fundamentals, and historical performance to best select the ones that align with your financial goals.

Decide How Many Shares You Want to Start With

How many shares you should buy as a beginner depends on the stock price and the amount of money you have to invest.

Many brokers support fractional share purchases, allowing you to begin investing with as little as $1.

While you can you buy fractional shares at the start, you should strive to build a robust and diversified portfolio. You should aim to have at least 10 stocks with varying characteristics. The best strategy for portfolio diversity is to buy stocks in different sectors. Investing in companies of different sizes is another method to diversify.

Place Your Order

After you have selected the stocks to invest in and the number of shares to purchase, place your order. There are several order types and these are the most common:

Market Order

This order type executes immediately at the best possible price. As a result, Market Order is the best order type to select if you want to purchase or sell shares in the shortest amount of time possible.

Limit Order

This order type enables you to buy or sell shares at a certain price in the future. For example, a stock may be trading at $20 now but you expect it to drop a bit in the coming hours or days. In that case, you could place a Limit Order to buy the stock when it drops to $18.

On the flip side, you could set a Limit Order to sell the stock when the price climbs above $22.

Stop-Loss Order

This order type works when you are selling, and it is suitable if you want to minimize the downside risk to your portfolio. If you entered a stock at $15, you may place a Stop-Loss Order to sell it if it drops to $12. As a result, this order type will not execute immediately. Instead, it will fill when the conditions you set are met.

Can You Buy Stocks at Any Time?

The stock market operates from Monday to Friday, except on holidays. The standard trading time is from 9:30 a.m. to 4 p.m. Eastern time.

Investors can still access the market outside these regular hours. The pre-market session allows you to buy and sell shares before the stock market officially opens. The after-hours session allows you extra hours to trades stocks after the market officially closes.

Here are the three stock market sessions and their hours:

Pre-market trading session begins from 4 a.m. to 9.30 a.m. ET.
Regular market trading session starts from 9.30 a.m. to 4 p.m. ET
After-hours market session begins from 4 p.m. to 8 p.m. ET.

The premarket and post-market sessions are called extended-hours trading. They allow investors more time in the market, though the options and liquidity available during these times are more limited.

Depending on the broker or trading app you are using, you may have full or limited access to extended-hours trading.

How to Invest in Stocks Like a Pro

The stock market requires a careful approach if you want to succeed consistently. The secret to successful long-term investing relies in strategy. Here are some of the smart investing tips:

Research Stocks Before You Buy: Analyzing stocks before you buy can minimize the risks to your portfolio. A reliable stock research service can help.
Diversify Your Portfolio to Spread the Risk: Successful investors hold multiple stocks with varying characteristics. That helps to spread the portfolio risk.
Invest Regularly Regardless of Market Conditions: Pro investors apply the dollar-cost averaging strategy. It involves investing a set amount of money regularly in the same investments regardless of market conditions.