Stock trading and investing can be quite difficult for a beginner. From learning how the market works to choosing the right trading apps, it’s easy for new traders and investors to get confused and make mistakes. Given the complex nature of the marketplace, a beginner needs a trading app that has a simple user interface yet is furnished with all the necessary tools and features for securely placing orders in the market. The right trading apps for beginners should make the trading process simple
In this guide, we’ll discuss how to choose trading apps and our picks for the best trading apps for beginners.
What Are the Advantages of Trading Apps for Beginners?
The benefits include:
- Increased liquidity: Trading apps have democratized the stock market, attracting more participants to the market. The more participants in the market, the higher the liquidity.
- Low transaction fees: Unlike using the services of a professional brokerage or paying for computer-based trading platforms, trading apps are cheaper to use and execute trades.
- More control and flexibility in trading: Trading apps give you flexibility because you are not restricted to one market or exchange. You can participate in a variety of markets and across different asset classes, such as options and other derivatives.
- Multiple brokerage options: Because they are cheap and sign-up is free, you can have multiple trading apps. This increases your options and allows you to switch if any app does not meet your trading objectives.
- Access to online research tools: Trading apps come with a repertoire of educational and research material that traders can use to their advantage. Charts, technical tools, historical data, and market analysis features are usually available on trading apps.
- Ability to monitor investments in real time from remote locations: Another advantage of using trading apps is the ability to monitor your investments from everywhere and at your own convenience.
What is a Trading App?
A trading app is the version of a broker’s trading platform that can be installed on a mobile device. It is a software application for mobile devices that links traders to the market via their brokers.
Many traders now prefer trading apps to PC-based trading platforms because apps allow them to easily analyze the markets, place trades, and monitor their accounts on their smartphones while on the go— even while commuting to work. Some brokers such as Robinhood only provide a trading app and don’t make a PC desktop alternative available.
Trading apps have democratized the stock market because they make it possible for anyone to buy and sell stocks without worrying about the huge subscription cost of trading platforms. There was an upsurge in memberships and signups for trading apps in 2020. According to data from Apptopia, between January and June 2020, there was an 88 percent increase in the average number of trades per day via investment apps. Robinhood has over 13 million users.
3 Ways You Can Benefit from a Trading App
Here are three ways you can benefit from trading apps:
- Quick access to the financial markets: Trading apps make it easy for you to access the financial markets since they usually don’t require subscription fees. Moreover, the simple interface makes trading quick.
- Ability to trade from any location: As long as you have an internet connection, and the use of the app is permitted in your location, you can execute trades and monitor your positions from anywhere around the world. You can even trade while on a train.
- Improves understanding of stock markets: Some trading apps come with a lot of financial data, research tools, and educational resources that can improve your understanding of the stock market.
Our Picks for the Best Trading Apps for Beginners
The best trading app for you depends on your investment goals and the trading experience you desire. There are a plethora of trading apps you can choose from. After reviewing apps using various criteria, such as commission fees, tradable assets, trading tools, speed in executing trades, and educational resources, we came up with this list of the best trading apps for beginners.
How do Trading Apps Work?
Beginners might find it difficult to understand how trading apps work, but the process is straightforward. When you place an order — say, a buy order — via the app, the order goes to the broker or the broker-dealer who then deducts the appropriate amount from your account and decides whether to send the order to the exchange or a third-party market maker or to execute it internally (matching your buy order with a sell order from another client). The order is then routed through a clearinghouse which clears the trade after two business days. However, because the stock has been paid for, the trader is given ownership of the stock.
Trading apps make their money from interest on margins (borrowed trading funds), rebates, and memberships (which give customers access to exclusive investment options or premium research).
3 Steps to Using a Trading App?
Choose Your Preferred Trading App
There are several reasons why you may prefer one trading app to another: fees, user interface and ease of use, analysis tools, educational resources, or personalized features. Before you choose, you can download some trading apps and try trading with a demo account.
Open a Trading Account
When you’ve chosen and downloaded a trading app, sign up to create a trading account unless you already have one with the broker. You have to enter your name, email address, and home address details, and you might have to provide some ID. Deposits can typically be made via various payment methods, but look out for minimum balances.
The trading app will list the available securities — including stocks and ETFs — which you can trade, and you should be able to filter this list to shortlist the securities you’re interested in. Select the security to trade, and press the “buy” button, but beware that beginner traders shouldn’t risk more than 1%-2% of available trading funds on a single trade.
What Are the Disadvantages of Using a Day Trading Platform?
The disadvantages include the following:
- Careless investing: There is a risk of over-trading because of the easy access to the market. You may even unintentionally place a trade. One way to curb this is by placing trade limits on your account.
- No professional guidance: Not getting a professional to guide you when you’re just starting your investment journey can have negative effects on your portfolio growth. You may not know how to do good research or the right risk management parameters to use.
- It can be addictive: Trading can be addictive. Some traders feel a rush of adrenalin similar to what gamblers and drug addicts experience, so they start to crave satisfaction from trading. With the market at your fingertips anytime, it can be hard to resist.
- Slow internet connection: Your trading depends a lot on your internet connection, and a momentary delay can make a bigger difference to your profitability if you’re a day trader.
Expert Tip on Selecting Trading Apps for Beginners“ Beginners should be careful to choose a trading app that suits them. The first step should be to open a demo account and try out the app to see the available features. A suitable trading app should be easy to use, free from subscription fees, offer commission-free trading for stocks and ETF, and deliver a fully-featured online trading experience. ”
How to Choose the Best Trading App for Beginners?
The factors you consider when choosing a trading app depend on your unique needs, but most times, you will need to answer these questions:
Is the Broker/Broker-Dealer that Offers the App Regulated?
Find out whether the firm behind the trading app is regulated in the country where it operates. In the US, the firm must be regulated by the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA) if it’s a stockbroker/broker-dealer, or with the Commodity Trading and Futures Commission (CTFC) in the case of futures trading. The Financial Conduct Authority (FCA) regulates the financial markets in the UK.
What Fees and Charges Apply?
Always find out what fees and commissions you would incur as a user. If you intend to day-trade, you will be posting a high volume of trades, so the fees can easily add up. Look for apps that offer commission-free trading.
What Payment Methods are Accepted?
Go for an app that has a plethora of payment options. This gives you flexibility in funding and withdrawing from your account.
What Are the Available Assets to Trade?
Find out what assets are traded on the app. Some trading apps do not allow options trading, while others omit certain ETFs and penny stocks from their stock list. This could limit your trading options and chances to make money.
Is There a Demo Account?
Every trading app should offer demo trading, which will allow you to familiarize yourself with features on the app before embarking on live trading.
What is the Account Minimum?
The minimum account balance varies across trading apps, so try to know the minimum deposits. This is especially useful if you want to trade options that require a minimum margin requirement.
What Educational Resources are Available?
Some trading apps provide educational resources that can help users understand how to use the app and improve their understanding of the markets. This feature could distinguish one trading platform from another.
Is There Help and Support Available?
Sometimes, there may be a technical glitch when using trading apps: an order may not be executed on time, or there are delays in depositing funds. So, be sure the app offers a reliable customer support service.
Can I Use This from Anywhere?
Some countries are restricted from using some trading apps due to regulatory and security reasons. Check whether the trading app is available to users from your country of residence.
Frequently Asked Questions
The best trading app is different for each trader, even beginners. It depends on what the trader considers most important — the user interface, available tools, or trading fees. However, the basic TD Ameritrade Mobile app is great for beginners.
RobinHood started the commission-free trading policy. However, other platforms are now offering commission-free trading for stocks and ETFs.
Some trading apps are just too simple with minimal trading tools. However, some are loaded with useful trading tools, such as charts, technical indicators, drawing tools, historical data, real-time price quotes, market analysis, and premium research.
As with other apps on your mobile device, it only takes a few minutes to download and install a trading app. After installation, you sign up for a trading account by providing your details.
Trading apps make money through various means, including payments of order flow from market makers, interest on deposits, and commissions on rebates. They may also charge a premium for access to exclusive research and analysis.
Trading apps offer you access to the market whenever the markets are open. If you’re in the US, that would be between 9:30 am and 4:00 pm ET. You can also trade during after-hours and pre-market.