In this guide, how to trade the stock market for beginners. I will cover the different types of trading  strategies that provide the lowest risk for the highest reward.

I will also explain what you need to get started, the best tools to use to gain an edge, how to select stocks, create a plan, and use a stop loss. Lastly, I will share some of the strategies that I use to consistently beat the market.

Short Or Medium Term?

keeping things simple works best, the more complex you make your trading, the less money you will make, this is why I avoid trading, that relies entirely on complicated technical analysis like the plague, complexity will psychologically effect your emotions

 And dominate your trades leading to bad decisions, statistics also show that over 90% of day traders lose money, that’s why I take a longer-term approach,

Getting Started

To start trading as a beginner, you need two essential things. Firstly, you need money; obviously, you’re going to need some cash. As a minimum, I would suggest starting with around £/$3000. You won’t get a huge return, but it could be used as a starting point.

 Secondly, you need time. Fortunately, the strategy I am covering is not overly intensive. As long as you have a spare hour a day to do research, you will have the ability to trade the market.

I highly recommend taking advantage of trading within a tax wrapper. In the UK, we have the self-select ISA, which protects us from taxes on profits. Other countries may have similar schemes, so it’s worth researching those for more information.

Brokers

Firstly, you will need to find a broker. Fortunately, there is a growing range of brokers to choose from, which are increasingly cost-effective. It is important to find a broker that offers access to the stocks you want to buy. You can check out this broker

 Comparison guide to help you with your research. Once you have chosen your broker, buying stocks is a straightforward process. Simply select the stock you want to purchase, enter the volume of shares or the value, and click the buy button. Voila, you now own the shares!

Traders Tools

I strongly believe that we are currently living in the best time for traders. Thanks to the advancements in technology, the following tools, that were once exclusively available to institutional Investors at exorbitant costs have now become accessible and cost-effective for retail investors.

Best Laid Plans

Every trader, regardless of their level of expertise, needs a trading plan. You should take the time to ask yourself what you want to accomplish from each trade. Do you aim for short-term gains in a few days, medium-term profits with a target price, or a long-term

 Tuck away? Answering these questions will help you decide whether to use a share trading or spread betting account, how many shares to purchase, setting a target price, and deciding where to place your stop loss.

Remember, you made a plan for a reason, SO STICK WITH IT and unless it is on the upside, for example changing the target price, try not to diverge!

Pull Out All The Stops

Emotions play a pivotal role in the markets, and the most seasoned trader can be affected by them, so we must try to use every resource possible to remove such emotions, a stop loss is an effective tool that is provided through most brokers, in fact, a large portion of

 Emails I receive, are from readers who have lost money by not setting a simple stop loss and have let the falling share price run away from them, then find it difficult to crystallize the loss. remember always better to get out quickly if the trade turns against you and a stop loss will help you achieve this.

The Strategies

OK, now on to the fun stuff…

Firstly, there is no right or wrong when trading the market, and strategies differs with each individual, however, the following few, have consistently worked for me!

1. Trade The Range

Sometimes, stocks will trade within a range and will ping pong, between a support level and a point of resistance, this is because the stock is hard to price, traders think it’s worth this much… but not as much as that. “Here lies an opportunity”, You can short the stock

 (see, going short below) at the resistance level and set your stop loss just above or you could buy at the support and set your stop loss just below, I prefer the latter as if there is

a sudden bid for the stock, there might be a gap in the close and opening price, in this case, you would not get stopped out at your desired price, but the best available price, which could lead to losses. A solution to that would be a guaranteed stop, which would be an initially charge paid through a wider spread.

If you have ever been bowling with friends or family, you most likely have used a Hollywood Bowl, they also happen to be listed on the main market of the stock exchange, I could see they were trading in a range of 220 -275, so I bought in at 225 and set my stop

 loss at 200. I then sold at 251 for a profit of £425.00. I have since bought it back after breaking out of the range.

2. Quality And Value

One strategy is to scan for quality shares with strong fundamentals, there are many different metrics that traders use, however, I like to seek companies that have lots of cash and little debt, increasing their earnings, pay out a dividend and have a positive outlook,

 For value, the forward price to earnings (P/E) ratio, and price to earnings growth ratio, (PEG). Combining, quality and value can create strong momentum in the share price and discovering them before the market does, can result in some great returns.

Yu Group (YU) a utility provider to the business sector ticked all the boxes, and had all of the quality and value ingredients, with a forward P/E of 7,  so i bought at £6.82, A company that still looks fantastic value, and I am up nearly 200%.

3. Going Short

Speculating on stocks increasing in price is not the only way to make money, did you know you can also trade stocks when you believe they are going to fall? This is called, going short. It’s a strategy frequently used by hedge funds, to make money for their

 Clients, even if the market is declining. However, the strategy is not only limited to the financial elite, retail traders also have the option, using spread betting in the Uk or via options in the US. Above we looked at companies with strong fundamentals, so now we

 Flip it and find companies that look financially weak. In July 2023 a company called Carnival (CCL), came on to my radar, listed on the FTSE 100, it had suffered badly during COVID-19, and since then, had fluctuated between £6 and £18 a share, at the point of

 Research It was trading at around £14, and after checking the stats,I could see that the forward P/E ratio was over 40, high even for a tech stock! and considering they were estimated to make a huge loss for the year, not to mention a large amount of debt, It

 Ticked quite a few boxes. Another factor was the market as a whole, was turning bearish and started to head lower, which generally means, anything overvalued, gets hit the hardest. So I went short just above £13, It kept dropping and started to recover at £8.00, strong buying returned to the share price after some positive news about cruise numbers, so I closed out For a nice profit just under £10. 

If you think the stock market is going to decline, you can short the entire index instead of selling individual stocks. This can be a useful strategy to hedge against potential losses or protect your portfolio from a black swan event like the 2020 crash. Shorting the major indices during a bearish market can also lead to significant profits.

Conclusion

If you have read the guide on how to trade the stock market for beginners and are thinking of trading yourself, it’s important to start with small amounts and increase your stake only as you gain more experience. There are a lot of mistakes that new traders can make, so

 It’s crucial to protect your funds at all costs. Please note that this guide is intended for educational purposes only and does not constitute investment advice.

If you would like to learn more, head over to theleantrader.com, where you will find more educational insights and new strategies by following along to my trading diary. Good luck.