# Stock Trading > How stock trading works in practice: opening an account, choosing stocks, placing orders, managing risk and the costs to expect, with a worked first trade. Source: https://learn.tradelabsai.com/markets/stock-trading/ Track: Markets and Instruments · Level: Beginner · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Stock Trading", https://learn.tradelabsai.com/markets/stock-trading/ Stock trading means buying and selling shares of companies to profit from price changes over days, weeks or months, rather than holding for years. It is the most accessible form of trading: accounts are easy to open, prices are transparent, and many brokers charge no commission on US stocks. This lesson walks through how it works in practice, from choosing what to trade to managing a position. ## What you need to start 1. **A brokerage account.** Choose a regulated broker with reliable execution, reasonable costs and the order types you need. See [How to Choose a Broker](https://learn.tradelabsai.com/industry/how-to-choose-a-broker/). 2. **A cash or margin account.** Beginners should start with a cash account. Margin adds leverage and new risks. See [Margin](https://learn.tradelabsai.com/markets/margin/). 3. **A plan.** What you trade, when you enter and exit, and how much you risk. See [Building a Trading Plan](https://learn.tradelabsai.com/start-here/building-a-trading-plan/). 4. **Charting tools.** Most brokers include charts; many traders also use dedicated platforms. ## Choosing stocks to trade Not every stock suits every trader. Useful filters for a starter watchlist: | Filter | Why | |---|---| | Average daily volume above 1 million shares | Tight spreads and reliable fills | | Price above $10 | Fewer erratic moves; lower spread cost as a percentage | | Clear trend or range on the daily chart | Easier to plan entries and exits | | No earnings report during your planned hold | Avoids overnight gaps | | Sector you understand | Easier to interpret news | Many traders keep a short list of 20 to 50 stocks and learn how each behaves, rather than scanning thousands every day. ## Styles of stock trading - **[Day Trading](https://learn.tradelabsai.com/strategies/day-trading/):** positions opened and closed the same day. Needs time, fast execution and, in a US margin account, compliance with the [Pattern Day Trader Rule](https://learn.tradelabsai.com/industry/pattern-day-trader-rule/). - **[Swing Trading](https://learn.tradelabsai.com/strategies/swing-trading/):** holding for days to weeks to catch one move. Fits around a job. - **[Position Trading](https://learn.tradelabsai.com/strategies/position-trading/):** holding for weeks to months based on longer trends. ## A worked first trade **Example: A swing trade, step by step** **Setup:** a large company stock is in an uptrend above its 50 day moving average and pulls back to a previous resistance level at $95, now acting as support. **Plan:** buy if the price bounces from $95 with a bullish daily candle. Stop below the pullback low at $92.80. Target the recent high at $102. **Size:** account $15,000, risk 1% ($150). Risk per share if bought at $95.40 is $2.60, so 57 shares (about $5,440 of stock). **Orders:** a buy limit at $95.40, with a stop at $92.80 and a sell limit at $102 attached as a bracket. **Outcome A:** target hit: profit about $376, or 2.5 times the risk. **Outcome B:** stop hit: loss about $148, as planned. ## Costs of trading stocks - **Commissions:** zero at many US brokers for online stock trades; not everywhere. - **The spread:** you buy at the ask and sell at the bid. See [Bid-Ask Spread](https://learn.tradelabsai.com/markets/bid-ask-spread/). - **Slippage:** especially on market orders and in thin stocks. See [Slippage](https://learn.tradelabsai.com/markets/slippage/). - **Regulatory fees:** small SEC and FINRA fees on sales in the US. - **Taxes:** short term gains are often taxed at higher rates. See [Trading Taxes and Capital Gains](https://learn.tradelabsai.com/industry/trading-taxes-and-capital-gains/). ## What moves individual stocks Company news, earnings reports, analyst upgrades and downgrades, sector moves and the overall market. Most stocks move with the broad market a large part of the time, so many traders check the trend of the S&P 500 or Nasdaq before trading individual names. See [What Is an Index?](https://learn.tradelabsai.com/markets/what-is-an-index/) and [Earnings Trading](https://learn.tradelabsai.com/strategies/earnings-trading/). ## Managing risk - Risk a small, fixed percentage per trade. See [Position Sizing](https://learn.tradelabsai.com/risk/position-sizing/). - Always know your stop before entering, and place it. - Avoid holding through earnings unless that is your plan. - Limit how many positions in the same sector you hold at once. See [Concentration Risk](https://learn.tradelabsai.com/risk/concentration-risk/). - Keep a [Trading Journal](https://learn.tradelabsai.com/start-here/trading-journal/). ## Common mistakes - **Chasing stocks after big moves** because they appear on "top gainers" lists. - **Trading low priced, illiquid stocks** where spreads and manipulation risk are high. - **Ignoring the market trend** and buying individual stocks during broad sell offs. - **Averaging down** on losing positions without a plan. ## Frequently asked questions ### How much money do I need to start trading stocks? Many brokers have no minimum and allow fractional shares, so you can start small. Enough to size positions sensibly after costs is more important than a specific amount. ### Is stock trading profitable? It can be for disciplined traders with a tested approach, but many beginners lose money. Starting small and focusing on risk control improves your odds. ### What is the difference between trading and investing in stocks? Investing focuses on long term ownership of businesses; trading focuses on shorter term price moves. See [Investing vs Trading](https://learn.tradelabsai.com/start-here/investing-vs-trading/). ## Continue learning - Next lesson: [Forex Trading](https://learn.tradelabsai.com/markets/forex-trading/) - Previous lesson: [Trading Halts and Circuit Breakers](https://learn.tradelabsai.com/markets/trading-halts/) - Related: [Trading Halts and Circuit Breakers](https://learn.tradelabsai.com/markets/trading-halts/): Trading halts pause a stock or a whole market. Learn why halts happen, how US circuit breakers and limit up limit down bands work, and what they mean for you. - Related: [What Is a Stock?](https://learn.tradelabsai.com/markets/what-is-a-stock/): A stock is a share of ownership in a company. Learn what owning a share gives you, why stock prices move, common vs preferred shares and how to trade them. - Related: [Order Types Explained](https://learn.tradelabsai.com/orders/order-types-explained/): Market, limit, stop, stop-limit and trailing stop orders explained with examples. Learn what each order does, when to use it and the mistakes to avoid. - Related: [Position Sizing](https://learn.tradelabsai.com/risk/position-sizing/): Position sizing decides how many shares or contracts to trade so each loss stays small. Learn the formula, worked examples for each market and common mistakes. - Related: [How to Choose a Broker](https://learn.tradelabsai.com/industry/how-to-choose-a-broker/): A practical checklist for choosing a broker: regulation, safety of funds, real trading costs, markets, platforms, support and the red flags to watch for. - Related: [Day Trading vs Swing Trading](https://learn.tradelabsai.com/strategies/day-trading-vs-swing-trading/): Compare day trading and swing trading on time, costs, risk, capital and psychology, with worked numbers, so you can choose the style that fits your life.