Finder's Pick for
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
So far, 2021 has demonstrated the potential for everyday investors to profit from trading stocks online – as well as the risks involved. Investors gathered in trading chatrooms and armed with online trading accounts have sent the prices of some stocks on wild rides and become the talk of the financial world.
Good news, though: you don’t have to be a furious full-time day-trade warrior to make money trading stocks online. You can start with a few dollars, a few clicks and a little time.
With online stock trading platforms, you can trade quickly and easily through trading website and apps. While online trading is an efficient, convenient way to invest money, it does carry some risk.
Trading is a more involved approach to investing and is also referred to buying shares or stocks. Instead of borrowing money or trying to raise capital, companies sell shares or partial ownership of the company to raise funds for expansion. Online stock brokers make it easy to place a trade through the click of a button.
While online stock trading can seem overwhelming, getting started is actually very easy. However, if you’re new to online trading, it doesn’t hurt to get a little practice before you jump in. Consider paper trading until you understand the basics or graduate to an online trading account, then consider charting software for more advanced online trading.
Once you’re ready to open an online trading account, you’ll need to decide which platform is right for you. The process will vary for each platform, so make sure to consider ease of use when choosing a product. Compare your options to find an online broker that offers the features, fees and capabilities that you want, then sign up to start trading.
Step 1: Visit the website or mobile app of your preferred platform and open an account.
There are many online brokerages available for Canadians to buy stocks. Some focus on low-cost trading, while others charge higher fees and commissions but offer advanced tools to help you make investment choices. All of Canada’s largest banks offer online trading platforms. Opening an account is easy. In most cases you simply need to enter some personal information and you can begin trading almost immediately.
Step 2: Figure out what kind of stock trading account you will open.
Generally speaking, your choice will be between an RRSP, a TFSA, and a non-registered account. The first two account types are government-sponsored savings vehicles that have certain tax advantages. A non-registered account does not have any such benefits, so you’ll have to pay the taxman on any investment gains you enjoy.
Step 3: Decide on an investment approach.
Before you start trading, it would be a good idea to come up with at least a basic plan for what kind of investor you’ll be. Would you prefer to buy a handful of stocks and hold them for the long haul without worrying too much about ups and downs in the meantime? Or maybe you want to invest in stocks that pay a healthy dividend, potentially increasing your overall return. Many investors prefer to buy the stocks of companies they feel are poised for big long-term growth. This may result in lower returns initially but this risk implies a bigger reward down the line.
Step 4: Fund your account and make some trades.
All you need to do now is make a deposit or transfer an existing trading account to your newly created one. Once your account is funded, you can search the stocks you are looking for and put in an order to buy.
With so many platforms and online trading products available, it’s important that you compare your options to find the right platform for your situation:
Online trading is a broad term that refers to different ways to buy and sell assets online. Here are some of the more popular methods of share dealing:
A key part of trading online is learning how to assess individual stocks. There are many ways to evaluate stocks and pick out the good ones that are selling for a bargain. So-called value investing has been made popular by famous investors such as Warren Buffett. The idea here is to seek out stocks with good “fundamentals” like solid earnings and strong cash flows that are trading below their inherent worth.
You can look at how a company’s earnings have fluctuated over time. Are earnings on an upward trajectory? How do they fluctuate during good and bad economic times?
How do a company’s revenue and profits compare with its main competitors. Does it have any special advantages that could allow it to gain market share at the expense of its rivals?
This metric shows how a company’s stock price compares with its earnings. You calculate this ratio by dividing a company’s share price by its earnings per share. This is an easy way to compare companies in the same sector and identify those that may be undervalued and thus a good buying opportunity.
Corporations issue two types of stock:
Common stock: These shares represent ownership in a small piece of a company. Generally speaking, these are what most people refer to when they say they are buying stocks. You make money investing in common stocks when you sell them for more than you paid for them, or when you receive dividend payments. Depending on how much stock you own, you are entitled to vote at shareholder meetings.
Preferred stock: This is a bit different from common stock. Preferred stocks tend to have a fixed dividend that is paid out to shareholders before common stock dividends are paid. If a company enters bankruptcy, preferred stockholders are paid from the remaining assets before common stockholders.
It’s also important to decide on an overarching investing strategy that guides what types of assets you put in your portfolio.
This is also sometimes called passive investing. You buy a security like an ETF or mutual fund that tracks an index (for example, the TSX Composite Index). It is called passive investing because the strategy here is to buy and hold these assets for a long period of time.
This strategy involves buying stocks that pay relatively high dividends. These annual payouts to investors can add to your overall returns, especially if you reinvest the dividends back into your portfolio.
This strategy focuses on stocks with big future growth potential. Yes, buying assets that are expected to grow is the basis for all investing. But this approach may result in volatility in the short-term in exchange for bigger gains down the road. What’s more, some stocks may never realize their potential.
If buying and selling stocks still seems intimidating, you could consider using a robo-advisor. Robo-advisors are algorithms that invest in a mix of stocks (and bonds) according to your risk tolerance, financial situation, and investing timeline. For the most part they are also cheaper than paying a human stock broker to pick stocks for you. This passive investing approach saves time too, as you don’t need to research what shares to buy and sell and when to do so.
Paper trading is a great way for beginners to get started trading stocks online in Canada. It allows you to make theoretical trades based on simulated or actual market data so that you can practice trading. It’s easy to get started:
For more advanced traders, charting software and market research reports may improve your trading abilities. They’ll provide a more in-depth look at various markets and can help you develop trading strategies to reach your short and long-term financial goals.
Online trading platforms make it easy to invest in stocks, bonds, foreign currencies and other assets at any time, no matter where you are. Most offer multiple ways to trade, creating new opportunities to earn money and allowing you to diversify your portfolio. Once you’re ready to trade, compare your options to find a platform that suits your trading needs.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Read our guide to the best places to sell your used car in Edmonton.
Check out these seven popular options when you need to sell a used car in Calgary.
Market volatility can be nerve-wracking. Discover 3 trading strategies plus the pros, cons and risks of investing in volatile markets.
Find out the key differences between the FTSE 100 and Dow Jones plus key points to consider before investing.
Find out the key differences between the Dow Jones and S&P 500 plus key points to consider before investing.
Find out the key differences between the FTSE 250 and the S&P 500.
Learn about how and where to sell a car online in Vancouver.
We narrowed down the best stock trading platforms based on 9 different categories. See how your brokerage stacks up.
Read our guide to the six ways to finance a TV in Canada, including options for bad credit.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.