A Beginner’s Guide to Stock Trading [2025]: How to Purchase Stocks

In this guide, we will look at stock trading for beginners, delving into how to buy stocks, sell them, and analyze many of the features used when trading. In addition, we’ll go over:

• Stock-buying methods;
• Avoiding common stock trading mistakes;
• Selecting a suitable brokerage;
• What to look for when researching a stock;
• Budgeting;
• Executing trades;
• Portfolio-building recommendations and much more.

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.

Nowadays, investing in stocks doesn’t have to take place on the New York Stock Exchange (NYSE) floor; you can do it online from the comfort of your couch on your phone.

However, despite the ease of buying a stock in this day and age, it’s crucial to be well-versed in what you’re doing. For this reason, we’ll take away the intimidating side of trading and teach you how to get started showing you how to trade stocks in order to optimize your profits while reducing your costs. Lastly, this guide will primarily focus on investing in actual stocks (buying and selling the underlying asset) instead of derivative financial instruments such as contracts for differences (CFDs).

Beginners’ corner:

• What is Investing? Putting Money to Work
• 17 Common Investing Mistakes to Avoid
• 15 Top-Rated Investment Books of All Time
• How to Buy Stocks? Complete Beginner’s Guide
• 10 Best Stock Trading Books for Beginners
• 6 Basic Rules of Investing
• Dividend Investing for Beginners
• 5 Passive Income Investment Ideas

The opposite of spending money in the present is investing. It saves money for the future in the expectation that it will grow over time, but it also carries the risk of losing money, which is why it’s important to utilize all of the tools at your disposal when you invest.

One such investment vehicle is stock trading (investing in stocks or buying stocks). Stock trading is defined as buying and selling shares in companies to make money from price fluctuations — traders monitor these price changes closely, intending to buy low and sell high, and in the process, make a profit.

The notion with investing is that money or capital is invested with the hope of growing your money over time; this is done by putting money to work in one or more types of investment vehicles.

Starting your investment journey early, particularly with stocks, offers the potential to grow your wealth and stay ahead of inflation.

Over time, as you progress towards your financial goals, you can transition from stocks to the relative safety of bonds. This gradual shift helps balance your portfolio, maintaining growth while reducing risk as you near your target.

The easiest and most common approach for beginning investors to get exposure to stocks is through the stock market. Investing in stocks is simply purchasing small shares of ownership in a publicly traded company.

By investing in these modest shares, you’re hoping that the firm will grow and prosper in the long run, which is the aim. As a result of the company’s growth, in the future, other investors may be willing to pay more for your shares, and if you decide to sell them, you’ll be able to make a healthy return.

If you’re interested in learning more about putting your money to work be sure to check our two essential guides on the best investment books and stock trading books of all time.

Alternatively, read our guide explaining what is investing to know where to start. An inexperienced investor is prone to making costly errors due to overconfidence, impatience, or even naiveté. However, these blunders may be quite expensive; therefore, learning how to avoid them is highly recommended.

Before you begin investing, it is essential to obtain some knowledge in order to maximize your profits and minimize your losses. After reading this guide, you’ll have a better sense of the mindset you’ll need, the expectations you may have, and the techniques that will be most effective. Here’re the most common investing mistakes made by novice stock traders:

Expect to get rich overnight:

It is unrealistic for newcomers to expect to see significant increases in their portfolios overnight, although this sometimes happens in the stock market.

Lack of time spent for Technical and Fundamental analysis:

It is more likely that you will wind up as a gambler rather than a trader if you do not have the proper research mindset in place. In order to make an informed investment decision on any company, you must first understand how the firm makes money, what its competitive advantages and risks are, how fiscally sound the company is, and how promising its future appears to be.

Not having a proper trading plan:

Plan your trade – trade your plan. Professional traders have their set up position with entry, exit, and stop losses set in mind before entering a trade and executing it. Unabated enthusiasm and even greed will drive far too many novice investors (and many seasoned investors, as well) to purchase shares of businesses, with little consideration given to whether the stocks are undervalued or overvalued.

Following the wrong sources:

For many new investors, it’s easy to place their trust in financial TV experts, YouTube tips, or stock picks from a friend or colleague. Anyone may recommend a stock, but you seldom know the recommender’s track record – and even the best investors make mistakes from time to time; hence, in the long term, it’s highly advisable to learn the stock trading ‘magic’ yourself.

Buying Penny Stocks:

Traders may purchase penny stocks for as little as $5, with many of them trading for as little as $1. For new traders, the appeal is that you can get a lot of shares for not much money. However, it is common for these stocks to sink to zero, and just a handful soar. It’s also worth noting that unprofitable businesses may easily be manipulated by scammers hyping up online “pump-and-dump” schemes.

Not diversifying:

Not diversifying enough is another common investing mistake. Owning ten energy companies and ten electric vehicle (EV) companies is not diversification. A drop in the price of oil or gas could change the fortunes of half your portfolio, as could a chip shortage that could put factory production on hold. By investing in a range of industries and a range of countries, you can mitigate the risk.

FOMO and buying stocks at all-time highs:

Purchasing shares at a downturn in the market may result in significant gains in the future. It is better to avoid succumbing to the fear of missing out (FOMO) and buying shares at all-time highs. At times, exercising restraint and patience is the most sensible course of action. However, this does not imply that if the value of a certain stock falls, you should buy more. Do some research before purchasing any further shares.

Not paying attention to investments:

Even if you want to be a buy-and-hold (HODL) investor, you shouldn’t ignore companies you’ve already bought. Keep up with them if you want to get the most returns on your investments. Most recommend doing so at least once a quarter. Look at their quarterly financial reports to see how the business is performing and what the management says about it.

An online brokerage account is all that’s required to start investing in stocks, mutual funds, and a range of other assets. Hence, as soon as you have determined what sort of investor or trader you want to be, you are ready to choose a brokerage account that is best for your needs.

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0% commission on stocks – buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

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eToro USA is registered with FINRA for securities trading.

30+ million Users worldwide

Get Started

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.

Before opening an account with a brokerage company, examine all the elements that matter most to investors.

For example, you should look into:

• How credible and safe the broker is;
• What are the fees (trading commissions, account fees);
• How easy it is to execute a trade on the platform (UX interface);
• Does it offer alternative investment options like stocks, mutual funds, and a wide range of commission-free exchange-traded funds (ETFs), etc.;
• Minimum balances and deposits;
• How easy it is to find helpful information on the platform;
• Customer support reputation;
• Does the broker offer a free demo account;
• A wide range of trading tools and indicators to use.

When it comes to online trading platforms, you may open a new account in a matter of minutes if you do not already have one.

Opening a brokerage account to trade stocks does not obligate you to invest your money right away but instead gives you a choice to do so when you’re ready for it.

However, after your brokerage account has been created, you can start investing in the stock market by depositing money into the online investment account, which you can later use to purchase stocks, ETFs, or other desired investment products.

Below you’ll find our pick for the best commission-free brokers that are highly credible and suited for beginners. These platforms are specifically oriented towards providing an easy and convenient way to invest and trade stocks. Furthermore, these brokers are easy to onboard even via your smartphones and are suitable beginner-friendly options.

1. eToro

eToro stands out as a leading social trading platform, offering a unique combination of investment opportunities ranging from stocks and commodities to cryptocurrencies. Founded in 2007, eToro has pioneered the concept of social investing, enabling users to follow, copy, and interact with successful traders within the platform. This approach not only simplifies the trading process for beginners but also adds an element of community engagement that’s rare in the financial trading world.

Product Offering

eToro’s product offering is diverse, catering to various investor interests and strategies. Users can trade in a wide array of assets, including:

• Stocks: Access to global stock markets with the option to buy fractional shares;
• Cryptocurrencies: A robust selection of popular digital currencies;
• ETFs: A variety of exchange-traded funds to diversify investment portfolios;
• Commodities: Opportunities to trade in metals, energy, and more;
• Forex: A comprehensive forex trading platform for currency trading.

One of eToro’s hallmark features is its CopyTrading feature, allowing investors to automatically copy the trades of experienced users, effectively democratizing access to expert strategies.

Fees and Charges

eToro’s fee structure is transparent, with no fees for stock and ETF trading, making it an attractive option for traditional asset investors. However, it’s important for users to be aware of other potential charges, such as withdrawal fees and overnight fees for positions held open in CFDs.

Platform Usability

Designed with user experience in mind, eToro’s platform is intuitive and user-friendly, suitable for both beginners and experienced traders. The platform also offers educational resources and a demo account feature, helping new users to learn and practice trading strategies without risk.

Security and Regulation

eToro is regulated by top-tier authorities, including the Securities and Exchange Commission (SEC) in the US, Cyprus Securities and Exchange Commission (CySEC) in Europe, the Financial Conduct Authority (FCA) in the UK, and the Australian Securities and Investments Commission (ASIC), ensuring a high level of security for its users. The platform also employs advanced security measures to protect user data and funds.

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eToro USA is registered with FINRA for securities trading.

30+ million Users worldwide

Get Started

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.

2. Interactive Brokers

Interactive Brokers (also known as “IBKR” or “IB”) is one of the world’s largest and most recognized online brokers. The broker focuses on extensive market access, competitive pricing, and efficient trade execution. Global exchange markets are available in the Americas, Europe, and the Asia Pacific for clients to invest in over 200 nations and territories.

IBKR facilitates trading with stocks, options, futures, forex, bonds, and funds on over 150 different marketplaces from a single integrated account.

Residents and institutions in the United States also have access to cryptocurrency trading with the broker.

Interactive Brokers also offers a wide range of account types to its users, including individual, joint, retirement, trust, family, and institutional.

Fees

When it comes to fees, Interactive Brokers has a reputation for low fees and commissions and offers two types of accounts for individual investors: IBKR Lite and IBKR Pro.

IBKR Lite has no account minimums and no inactivity fees for retail users trading publicly listed stocks and ETFs in the US whilst also offering zero commission on transactions. Thus, IBKR Lite is a more user-friendly platform for new investors.

IBKR Pro is for experienced investors and traders. For stocks listed in the US, Interactive Brokers charges different forms of commissions subject to a set pricing structure.

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IBKR pays up to 4.58% interest on cash balances of $10k or more.

Researching a stock is extremely useful, of course, since it helps you determine if a firm is worth adding to your portfolio or not by evaluating its financial performance.

Plan your trades by studying the fundamental and technical analysis of the stock.

Technical analysis (TA)

The technical analysis evaluates assets and identifies trading opportunities by examining statistical trends from trading activity, such as price movement and volume patterns found on price charts.

Using historical trading behavior and price fluctuations, technical analysts predict future price movements for security. While technical analysis looks at past price patterns and stock movements, fundamental analysis focuses on the company’s financial health in the here and now.

When determining a stock’s worth, the technical analysis examines price and volume rather than business results like sales and profitability. Furthermore, technical analysis techniques are used to examine how variations in price, volume, and implied volatility are affected by supply and demand for an asset.

Lastly, the aforementioned analytical tool is commonly used to produce short-term trading signals using a variety of charting tools. Still, it may also aid in assessing a security’s strength or weakness concerning the larger market or one of its fields. This information helps analysts in refining their overall valuation estimates by providing more relevant data.

Technical analysts generally look at the following main categories of indicators:

Price Trends

A market or asset’s price trend indicates the overall direction of the market or asset’s price. Trendlines or price action in technical analysis show:

Uptrend:

The price makes higher swing highs and lower swing lows for an uptrend.

Downtrend:

The price reaches lower swing lows and lower swing highs for a downtrend.

While most traders follow the trend, contrarians look for reversals or opportunities to trade against it. There are ups and downs, whether it’s the stock market, the bond market, or the futures market.

Below the downtrend is indicated by the purple horizontal line, and the blue horizontal line indicates the uptrend.

Using tools such as price action, trendlines, and technical indicators, you can determine when a trend is reversing and be alerted to it.

Three trends indicate the overall direction of the price movement:

• Market price trends
• Asset price trends
• Metric price trends

Meanwhile, rising data points, such as higher swing highs and lower swing lows, characterize uptrends. However, downtrends have dropping data points, including lower swing lows and low retracement levels at the beginning and conclusion of the trend.

Price patterns are frequently used in technical analysis to identify transitions between rising and declining trends. A price pattern is, by nature, a recognized structure of price movement that is defined by a sequence of trendlines and curves.

A reversal pattern happens when a price pattern indicates a shift in trend direction. In contrast, a continuation pattern occurs when the trend continues in its present path after a short reprieve.

Many traders choose to trade in the same direction as the trend, hoping for a continuance of that trend to bring them profits. However, it’s important to note that trend lines can illustrate the general direction of a trend; the relative strength index (RSI) gauges how strong it is.

Chart Patterns

Technical analysis relies heavily on chart patterns, but mastering them is a process that takes time and practice. Patterns on a price chart assist you in predicting what prices will do in the future based on the past.

There isn’t a single “best” chart pattern; they’re all utilized to illustrate distinct trends in a wide range of industries. Candlestick trading frequently uses chart patterns, which makes it a little simpler to see past market openings and closes.

In volatile markets, certain patterns work better than others. Some patterns function well in a bullish market, while others are better suited to a bearish market.

The following are just some chart patterns, to name a few:

• Head and Shoulders: Investing professionals consider the head and shoulders chart one of the most accurate patterns for predicting trend reversals. An upward trend is nearing its conclusion when the head and shoulders chart depicts a change from bullish to bearish.
• Double Top: If the price has been moving up for some time, then a double top pattern will emerge. In technical analysis, “tops” refer to price levels that can’t be broken. After the price reaches this level, it will take a slight bounce off it before returning to re-test it.
• Double Bottom: This pattern will appear when two valleys or “bottoms” have developed after a long decline. This indicates that the selling pressure is going to end, and a reversal is likely to begin.
• Rounding Bottom: The Rounding Bottom is a long-term reversal pattern best suited for weekly charts representing a lengthy consolidation period that transitions from a bearish trend to a bullish trend.
• Cup and Handle: A price chart technical indication that looks like a cup with a handle is regarded as a bullish signal, with lower trade activity on the right side of the pattern.

Volume

In trading, volume refers to the total quantity of a particular asset exchanged during a given period. As a result, volume is frequently shown alongside price data as crucial market activity and liquidity measurement.

There must be a buyer and a seller for every contract exchanged for the transaction to take place – each transaction is a separate exchange and will contribute to the trading volume. It’s important to know that the trading volume does not include the number of actual transactions; instead, it counts the number of assets exchanged.

Moving Averages (MA)

In order to get a trend line, a moving average takes the price points of an instrument over a defined time and divides them by the total number of data points. Traders like it because it may assist in predicting the current trend’s direction while at the same time reducing the influence of random price fluctuations.

The simplest MA is the Simple Moving Average (SMA), which is just a computation of the average price of data collection over a certain period. For instance, you would divide the past ten days’ data by ten to calculate the SMA for ten days.

By examining the historical price movement of a stock, a moving average may help you determine where support and resistance are located.

Support and Resistance Levels

Support and resistance levels can provide traders with additional information about the strength of a price trend. Both support and resistance refer to price chart levels that appear to constrain market movement.

Resistance levels are those at which prices consistently stop climbing, while support levels are those at which prices consistently stop falling. In a buyer’s market, the price will rise if there are more buyers than sellers; conversely, the price will fall if there are more sellers than buyers.

The more frequently a price reaches either level, the more accurate that level is in predicting future price changes. Traders typically find that both levels become psychological barriers whenever they purchase or sell after reaching a certain level.

For instance, if a price reaches or surpasses a support or resistance level but immediately reverses course, it only tests the level. The price may rise or decrease until a new level of support or resistance is found if a price breaks through a certain level for an extended length of time.

Read also:

Widely used TA indicators and chart patterns explained:

• Stochastic Oscillator
• Bollinger Bands
• Average Directional Index (ADX)
• MACD Indicator
• Death Cross Pattern
• Golden Cross Pattern

What are Chart Patterns? Types & Examples

To learn more about the most popular stock trading patterns, be sure to watch the video below.

Watch: Top 10 key chart patterns to be effective at trading by Trader DNA

Fundamental analysis

Plan your trades by studying the fundamental and technical analysis of the stock. Fundamental analysis is the term investors use to describe the evaluation of a company’s financials, leadership team, and competitors to determine if it merits a place in your investment portfolio.

Besides measuring the intrinsic worth of an investment to determine a stock’s value, fundamental analysis looks at:

• Earnings;
• Expenses;
• Assets;
• Liabilities;
• General public sentiments and press around the stock;

Conversely, the stock is also evaluated using technical analysis, which looks at the stock’s price and volume chart to anticipate future potential performance.

Quantitative research

In order to get started with your research, you should look at the company’s financials. You may start by collecting together a few documents that firms must submit with the Securities and Exchange Commission (SEC).

There are so many statistics in financial reports that it’s easy to get lost; thus, it is best to focus on these key metrics below in order to learn about a company.