Capital at risk. The value of your investments can go up and down, and you may get back less than you invest.
New to stock market trading? This five-step guide sets out what you need to know to begin buying and selling shares. As a starting point however, it’s important to understand the difference between the terms ‘trading’ and ‘investing’. And, ultimately, they refer to the length of time that shares are held.
Day traders usually buy and sell shares within a short period, often less than 24 hours, whereas investors tend to work on a ‘buy and hold’ strategy, with shares being held for periods often lasting several years.
On this basis, traders hope to make a small profit on each trade, which can accumulate into a significant gain over a volume of trades. They monitor and hope to exploit share price volatility with the aim of buying ‘low’ and selling ‘high’.
Investors, by contrast, typically look to make a larger profit from a smaller number of trades. They invest in companies with long-term growth potential, which they hope should lead to an increase in share price or asset value over time.
Investors may also use their portfolios to generate income from dividend payments. Traders generally might not hold onto shares for long enough to qualify for dividends, which tend to be paid on a six-monthly or annual basis.
If you are considering trading, here’s a five-step process of how to go about it.
Featured Partners
1. Understand trading styles and strategies
As a first step, would-be traders should carry out technical and fundamental analysis to decide where to put their money. Technical analysis involves looking at factors such as price movements, corporate earnings data and consumer confidence data, while fundamental analysis centres around whether shares are priced fairly, based on company-specific and wider-market examination.
From this analysis, traders can form a short-term view of price movements and create trading strategies. These might involve:
* Trend/momentum trading: where you buy or sell shares depending on the direction of an observable trend
* Swing trading: where you take advantage of short-term price movements using technical analysis of ‘support’ and ‘resistance’
* News trading: where you buy or sell shares immediately after news breaks that might affect prices
* Scalping: where you place a large number of short-term trades in hopes of making a small profit on many of them.
Pro Tip
It can be easy to become blinded by the potential for a 10-times return on an obscure ‘micro-cap’ stock. But remember that a stock trading at one pence can still lose 99% of its value – and fast
2. Choose a market
It’s not just shares that traders buy and sell – there are also bonds, ETFs, index funds, commodities and foreign exchange (forex). Forex is popular because the market is highly liquid and can be traded 24 hours a day, five days a week.
For those new to trading, however, trading the shares of individual companies may be less complex than commodities and forex markets.
Suggested Read: 10 Best Stocks To Buy Now
3. Research and select a trading platform
You’ll need to open an account with a trading platform to start trading, and most now come with the choice of online or app. Each platform has its own features and fee structure (more on this below) so we’ve compared the leading players to help you decide.
Some trading platforms allow you to trade shares within a Stocks and Shares ISA or Self-Invested Personal Pension (SIPP) and avoid having to pay Capital Gains Tax (CGT) on the profits. CGT is payable at 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers on shares (2025/2026). The annual tax-free allowance is £3,000.
It makes sense to use up your tax-free annual stocks and shares ISA allowance of £20,000 (tax year 2025/26) first.
Opening an account with your chosen platform should take no longer than 20 minutes. It involves sharing some personal details, including your National Insurance number. Before you can start trading, you’ll also need to fund your account via bank transfer or debit card.
Tax treatment depends on one’s individual circumstances and may be subject to future change. The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of tax advice.
4. Factor in fees
Your platform’s fees will determine how much of your profits you get to keep. Fees vary from one platform to the next, but include:
* trading fees: essentially a commission taken by the platform per trade. Some platforms charge no trading fees when you buy and sell, others charge a flat fee of between £5 and £10 per trade
* platform fees: an annual or monthly fee charged for use of the platform. While some platforms forego this kind of fee, some charge a percentage-based fee of around 0.25% and others charge a flat, monthly fee of between £5 and £10. In some cases, there’s a monthly cap on platform fees for share trading
* foreign currency conversion fee: for buying non-UK-listed shares in another currency, you’ll typically pay a fee of between 0.5% and 1% of the value of your transaction
* stamp duty: when buying UK shares, you’ll pay 0.5% in stamp duty.
Fluctuations in exchange rates may negatively impact the sterling value of your international investments.
The ‘spread’ on a trade also makes the platform money. For example, it might cost you 115 pence for a share if you’re buying, but you might only earn 112 pence from selling that same share. The difference between the two prices is known as the ‘spread’ with some platform spreads more competitive than others.
Lesser traded shares such as those on the FTSE Small Cap Index tend to have bigger spreads than those on the FTSE 100. Shares with smaller spreads allow traders to potentially make more in profit.
5. Start trading
With an account on a platform, funds in your account, and a strategy in mind, you can begin buying and selling shares.
You should search for the company whose shares you want to buy, either by name or its ticker symbol e.g. NVDA for NVIDIA. You should be given a live quote for the trade, which you’ll have 15-20 seconds to accept before a new quote is generated.
For UK-based stocks, the London Stock Exchange is open from Monday to Friday between 8am and 4.30pm. For US-based stocks the New York Stock Exchange is open between 9.30am and 4pm, also Monday to Friday.
Traders don’t necessarily need to buy whole shares, either. Some platforms allow traders to buy a share of a share known as fractional shares. This can lower the bar to entry if you’re interested in trading particularly valuable stocks.
Trading can be risky
Markets can be unpredictable, especially for novice traders without access to real-time trading feeds. Some platforms offer demo accounts where you can practise trading without putting any of your own real money on the line.
As a rule of thumb, it’s advised that day traders limit their trades to an amount equal to 1% of their portfolios to minimise losses. According to Day Trade Review, only the 1% of day traders make a profit, while 85% of day traders quit within the first three years.
Pro Tip
The most popular UK-listed stocks among AJ Bell’s DIY investors in 2025 were Legal & General, Rolls-Royce, BP, Taylor Wimpey and BAE Systems. The most popular US-listed stocks were Nvidia, Tesla, Strategy, Amazon and Palantir
There are measures you can take to mitigate risk beyond this ‘1% rule’ though. These include stop losses and limit orders. A sell limit order or ‘take profit’ is only executed at the set price or higher.
Stop losses automatically sell shares if their price falls to, or below, a level chosen by the trader. By using stop losses a trader could, for example, ensure they don’t lose more than 10% of a share’s value.
Limit orders automatically buy shares at or below a pre-determined price, but never above it.
Spreading trades among several companies, sectors and markets can help to avoid the problem of having all one’s eggs in the same basket, mitigating the risk of sectors or individual companies underperforming.
Be wary of ‘tips’ for a particular stock – especially in online communities. ‘Pump and dump’ schemes use this tactic to artificially inflate stock prices before selling at a profit and leaving those who were duped with losses when the stock falls in value.
Featured Partners
Frequently Asked Questions (FAQs)
Is there a risk-free way to trade?
Any kind of investment is inherently risky, but some trading platforms have demo accounts that will let you ‘play’ at trading without risking any real money.
Of course, the rewards are no more real than the risks but it’s a safe space to practise.
When can I start day trading?
Markets are open from Monday to Friday. The internet allows for 24-hour trading, given the time difference between countries. Whatever time it is, there’s a market open somewhere – as long as it’s not the weekend.
What is momentum investing?
Momentum investing means buying securities when prices are rising, or short-selling securities when prices are falling. These trades are not strictly based on technical analysis or fundamentals.
Is trading the same as investing?
They’re similar, but investors are more concerned with making profits via long-term investment, while day traders look to make short term profits.
What is a stockbroker?
Traditionally, stockbrokers were intermediaries who executed trades on behalf of traders. They became less relevant because of the internet and smartphone apps that enabled traders to do it themselves.
