THE BLOG
07/03/2013 03:38 pm ET | Updated Sep 02, 2013

5 Tips to Polish Your Online Stock Trading Skills

Recent surveys show that many Americans are too intimidated to get started investing -- but it's what they don't know, rather than what they are afraid of, that might be hurting them the most.

Once you know how to get started, everything else falls into place with these simple steps.

1. Open the Right Type of Account

The very first thing you need to do is select, open, and fund an investment account that has all the trading features you need but at minimum cost. You'll need a brokerage account, but just make sure you aren't being charged for additional premium research features you'll never use.

NerdWallet researched more than 70 of the top publicly available brokerage accounts in order to highlight the most affordable, best overall online brokers for online traders. If you want to stick with one of the top and most popular brokerages in the U.S., TD Ameritrade and E*TRADE are both good options reviewed here.

2. Determine Your Risk Profile

Once the money is in the account and you're ready to invest, what do you do? Pick stocks that you've heard of, or highly diversified mutual funds and ETFs? What's the right balance -- are you young and have time to take risks, or older and more risk averse? Put frankly, how much can you bare to lose? As with any investment, profits are not guaranteed; high-risk means high reward, and vice versa.

To aid in this selection process, NerdWallet's mutual fund screener allows investors to screen for fund features that matter to them and then sort by expense ratio, recent performance, and other fundamental metrics.

3. Look For Low Expense Ratios

Over time, one of the worst things that can eat away at your investment returns are the fees hidden in the funds themselves. Operating at multiple levels, fees can be tricky to decipher and should be disclosed in every fund's annual prospectus. Above all, look for funds with a low expense ratio so at least you won't be charged in excess of the industry average.

4. Know Your Personal Trading Limits

Once you have reached your optimal asset allocation and have invested in the stocks, bonds and funds of your choosing, step back and write it all down. Write down the price at which you bought the shares, and the prices below or above which you would sell, so you can hold yourself to this later. You should have one (or several) solid reason backing every investment decision you make, and if that disappears it may be a good indicator that it's time to sell, rebalance, or change your overall investment strategy.

5. Buy and Hold, But Don't Be Afraid To Rebalance

Unless you are an extremely experienced active trader -- or extremely lucky -- you should not expect to generate vast returns just by trying to make lots of stock moves to beat the market. Rather, Warren Buffett's time tested buy-and-hold approach is better for casual investors looking to make solid investments for the long term.

For the average American, an investment account can be a valuable tool in saving for college expenses, a first home, or retirement savings. Getting started, and then remembering to check back in on a regular basis, are the two most important things you need to do to succeed.