Stock trading means buying shares of a company and selling them later, usually through a brokerage account

To trade stocks, you open an account with a brokerage firm, deposit money, search for a stock by its ticker symbol, and place a buy order. When you own the shares, you can sell them at any time during market hours by placing a sell order. The brokerage holds your shares and cash, executes your orders, and sends you statements showing what you own and what you paid.

The entire process takes minutes once your account is funded. You do not need to be wealthy or have special credentials. Brokerages range from traditional firms like Fidelity and Charles Schwab to newer apps like Robinhood and Webull. Each charges different fees and offers different research tools, but the basic mechanics are the same across all of them.

Key Takeaways

  • You must open a brokerage account, verify your identity, and deposit money before you can buy any stock.
  • Stock prices move constantly during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays), and you can place orders to buy or sell at any time.
  • A market order buys or sells when ready at the current price, while a limit order waits until the price reaches the level you set.
  • Your brokerage holds your shares and cash in your account, and you receive statements showing your holdings and transaction history.
  • Selling works the same way as buying — you search for the stock you own, enter the number of shares, and choose your order type.

Opening a brokerage account and funding it

Choose a brokerage and visit their website or read their app. You will enter your name, address, Social Security number, and employment information. The brokerage verifies your identity using public records and may ask you to confirm recent transactions on a bank statement.

Once your account is approved (usually within one business day), you link a bank account and transfer money in. Most brokerages let you transfer by electronic funds transfer (EFT), which takes one to three business days to settle. Some also accept wire transfers, which settle the same day but may charge a fee. You do not need to deposit a large amount — many brokerages have no minimum, though some require $500 or $1,000 to start.

Your cash sits in the account until you place a buy order. You can see your available balance in your account dashboard at any time.

Finding and buying a stock

Every stock has a ticker symbol — a short code like AAPL for Apple or MSFT for Microsoft. Search for the company name or ticker in your brokerage's search bar. The stock's current price appears, along with charts showing its price history and basic information like the company's industry and market value.

Click "Buy" and enter the number of shares you want. The brokerage shows you the total cost (share price times number of shares, plus any fees). Then you choose your order type. A market order buys when ready at whatever the current price is — useful if you want the stock right now and do not care about small price swings. A limit order lets you set a maximum price you will pay; if the stock never drops to that price, your order never fills.

Review the order summary and click "Confirm" or "Submit." The order executes when ready for a market order, or sits waiting for a limit order. Your brokerage sends you a confirmation showing the shares you bought, the price per share, the total cost, and the date and time.

Understanding market hours and order timing

The stock market is open Monday through Friday, 9:30 a.m. to 4 p.m. Eastern time. Orders placed during these hours execute during the session. Orders placed outside these hours — before 9:30 a.m., after 4 p.m., or on weekends — sit in a queue and execute when the market opens the next trading day.

Some brokerages offer extended-hours trading, which lets you trade before 9:30 a.m. (pre-market) or after 4 p.m. (after-hours). Prices can swing more wildly during these times because fewer traders are active, and your order may not fill at all. Most new traders should stick to regular market hours until they understand how price swings work.

Selling shares you own

To sell, go to your account holdings or portfolio section and find the stock you want to sell. Click "Sell," enter the number of shares, and choose your order type the same way you did when buying. A market order sells when ready at the current price. A limit order waits until the price reaches your target.

Once your sell order fills, the cash appears in your account. You can withdraw it to your bank account, or use it to buy another stock right away. Your brokerage sends you a confirmation showing the shares you sold, the price per share, the total proceeds, and any fees.

Fees and costs you may encounter

Most major brokerages charge zero commission on stock trades, meaning you do not pay per transaction. However, some still charge fees for certain actions: wire transfers, account inactivity, or closing an account early. A few brokerages charge a small monthly fee if your account balance falls below a minimum.

You also pay the bid-ask spread, which is the tiny difference between what buyers will pay and what sellers will accept. When you buy at market price, you pay the ask (the higher price). When you sell at market price, you receive the bid (the lower price). This spread is built into the price and is not a separate charge, but it does cost you a few cents per share on each trade.

Limit orders do not cost extra, but they may not fill if the stock never reaches your price. Stocks held for less than one year are taxed as short-term capital gains, which are taxed at your ordinary income rate — higher than long-term gains. Your brokerage will send you tax forms at year-end showing your gains and losses.

What happens to your shares and cash

Your brokerage holds your shares in a street name, meaning the brokerage's name appears on the official ownership record, but you are the beneficial owner. You can sell them anytime, and you receive any dividends the company pays. If the company goes bankrupt, your shares become worthless, but your cash deposits are protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account.

You can view your holdings, cash balance, and transaction history in your account dashboard anytime. Most brokerages send monthly or quarterly statements by email. You can also read statements and tax documents from your account portal.

Common mistakes to avoid

Do not place a market order for a stock you have not researched. Prices move fast, and you may buy at a peak without meaning to. Use a limit order if you are unsure of the current price, or check the price one more time before confirming a market order.

Do not assume your order filled just because you placed it. Check your account holdings to confirm the shares appear there. Limit orders especially may sit unfilled for days or weeks if the price never reaches your target.

Do not trade with money you cannot afford to lose. Stock prices fall as well as rise, and you could sell at a loss. Never borrow money to trade (called buying on margin) unless you understand the risks — if the stock falls far enough, you owe money even after selling.

Do not ignore the tax implications. Selling at a profit creates a taxable event. Keep records of what you paid and what you sold for, because your brokerage will report this to the IRS and you must report it on your tax return.

Frequently Asked Questions

How much money do I need to start trading stocks?

Most brokerages have no minimum deposit. You can open an account and fund it with $100 or $500. However, some brokerages require $500 or $1,000 to open an account, and a few charge monthly fees if your balance stays below a certain level. Check your brokerage's requirements before opening.

Can I buy a fraction of a share?

Yes. Most brokerages now offer fractional shares, so you can buy $50 worth of a stock that costs $300 per share. This lets you own a piece of expensive stocks without needing thousands of dollars. Check your brokerage's rules, as some limit fractional shares to certain stocks or order types.

What is the difference between a market order and a limit order?

A market order buys or sells when ready at the current price, whatever that price is. A limit order sets a maximum price you will pay (when buying) or a minimum price you will accept (when selling), and waits until the stock reaches that price. Limit orders may never fill if the price never reaches your target.

Do I have to pay taxes on stocks I buy and hold?

You do not pay taxes just for owning a stock. You pay taxes when you sell at a profit (capital gains tax) or when the company pays you a dividend. The tax rate depends on how long you held the stock — less than one year is taxed as ordinary income, one year or more is taxed at the lower long-term capital gains rate.

What happens if the brokerage goes out of business?

Your shares and cash are protected by the Securities Investor Protection Corporation (SIPC) up to $500,000 per account. Your shares belong to you, not the brokerage, so they would transfer to another brokerage. Your cash deposits are also protected, though the process may take weeks.