Stock Trading for Beginners, Step by Step

What You Need to Know First

Stock trading means buying and selling the shares of listed companies to profit from price differences or dividends. A beginner starts by setting a goal and a budget, then learns the basics of analyzing a stock and practices on a virtual account. Only then do they place real orders, starting small, and they set a maximum loss before buying. If you have not opened a portfolio yet, you will find the steps in our article How to Buy Stocks in Saudi Arabia.

What Is the Difference Between Trading and Investing in Stocks?

Both involve buying and selling shares, but they differ in time horizon, goal and how decisions are made. Choosing between them is your first decision, because it shapes how you analyze stocks and how much risk you take:

ComparisonInvestingTrading (speculation)
How long you hold a stockUsually yearsDays to weeks, sometimes shorter
Source of profitCompany growth and cash dividendsThe price difference between buying and selling
Basis for decisionsThe strength and financial position of the companyPrice movement, trading volume and news
Number of tradesFewMany
Effect of commissionsLimitedLarger, because they repeat with every trade
Level of riskUsually lowerUsually higher

Neither is better than the other. What matters is knowing what you are doing and why, and not turning a losing short-term trade into a “long-term investment” just because it lost money.

What Are the Steps to Trade Stocks as a Beginner?

There are seven steps. Some come before your first trade and some after it:

  1. Set your goal and budget. Decide whether you want dividend income, long-term growth or profit from price movements. Then set aside an amount you can afford to partly lose without touching your essential expenses or emergency fund.
  2. Learn the basics. The Saudi Exchange’s Invest Wisely platform offers beginner guides to how investing works and its fundamentals, along with free workshops and webinars.
  3. Practice before you risk your money. The same platform describes a trading simulator where you build a virtual portfolio and practice buying and selling with virtual money, so check that it is still available. If it is not, try paper trading: pick two or three stocks and log hypothetical trades in a spreadsheet for four weeks, recording the entry price, exit price and commission. Review the results before you trade with real money.
  4. Choose a suitable trading platform. You need a fast, clear app that shows live prices and offers analysis and news tools. Options include the Derayah Financial platform. To compare apps, see our guide to choosing a stock trading app.
  5. Analyze the stock before buying. Use fundamental analysis, technical analysis or both (explained in the next section), and do not rely on a single tip from an unknown source.
  6. Place the order and set your exit plan. Enter the number of shares and the price, and use a limit order at first. Before buying, decide the price at which you will take your profit and the price at which you will cut your loss.
  7. Review your trades and learn from them. Write down the reason for each trade and its result, and review them regularly. Beginners who keep a record spot repeated mistakes faster than those who rely on memory.

How Do You Analyze a Stock Before Trading?

There are two main schools of stock analysis, and many traders use a mix of both:

ComparisonFundamental analysisTechnical analysis
What it studiesThe company itself: profits, revenue, debt and dividendsPrice movement and trading volume on charts
Question it answersIs the company strong, and is the price fair?When do I enter and when do I exit?
Best suited toMedium and long-term investingShort-term trading
Data sourceFinancial statements and company announcements on the exchange websiteCharts in the trading app

Watching the overall market also helps you see the bigger picture, as we explain in our article on the TASI index today.

What Should You Read on a Stock Screen Before Placing an Order?

Most trading apps have a screen for each stock that brings together the data below. Reading it top to bottom gives you a quick picture before you place an order. Field names and layout vary by app:

DataWhat it tells you
Last price and percentage changeWhere the stock is trading now, and how much it has moved since the previous day’s close
Bid and ask pricesThe best price you can sell at (bid) and the best price you can buy at (ask). The gap between them is an indirect cost
Day high and day lowToday’s trading range and where the current price sits within it
Trading volumeWhether the stock trades actively enough for you to get in and out easily
Quantities at the bid and askWhether there are enough orders at nearby prices

Which Terms Should You Know Before Your First Trade?

You will meet these terms in every trading app, and understanding them helps you avoid entry mistakes:

TermMeaning
Ask priceThe lowest price sellers are willing to accept right now
Bid priceThe highest price buyers are willing to pay right now
Trading volumeThe number of shares traded over a given period
LiquidityHow easily a stock can be bought or sold without moving its price much
Tick sizeThe smallest allowed change in a stock’s price. It varies by price range, and the Saudi Exchange revised it in June 2025, as reported by Gulf News
Cash dividendsA portion of a company’s profits paid out to shareholders
Market order and limit orderThe first guarantees execution and the second guarantees price. We explain the difference in our article on buying stocks

How Do You Calculate the Profit or Loss on a Trade?

Your real profit is the selling price minus the buying price, after commissions, which are charged on both the purchase and the sale. In the example below, we assume a 0.155% commission on each transaction, the rate SAB Invest publishes for local stocks. The example is illustrative and does not include any other fees or taxes:

ItemValue
Buy 100 shares at SAR 25SAR 2,500
Buy commission (0.155%)SAR 3.88
Sell 100 shares at SAR 27SAR 2,700
Sell commission (0.155%)SAR 4.19
Profit before commissionsSAR 200
Total commissionsSAR 8.06
Net profitSAR 191.94

The stock must first rise enough to cover both commissions before you make a profit. Every extra trade adds commissions, which is why frequent traders feel their impact more than long-term investors.

How Do You Build a Complete Trade Plan Before Entering?

Before you buy, write down three prices: your entry price, your target price and your exit price if the trade goes against you. Then compare the expected profit with the potential loss, after commissions in both cases. Using the same example, and assuming an exit at SAR 24 if the stock moves against you:

ScenarioSelling priceResult after commissions
Stock reaches the targetSAR 27Profit of SAR 191.94
Stock reaches the exit priceSAR 24Loss of SAR 107.60

The expected profit here is about 1.8 times the potential loss. If the potential loss in your plan is larger than the expected profit, reconsider the trade before you enter it. The numbers are hypothetical, for illustration only, and are not a forecast of any stock’s price.

How Do You Manage Risk When Trading Stocks?

No trading is risk-free, but the following rules limit losses and protect you from rushed decisions:

RuleHow to apply it
Define your loss before enteringWrite down the price at which you will exit if the stock moves against you, and stick to it
Do not put all your money in one tradeSpread your money across more than one stock or sector
Start with a small amountIncrease it gradually once you show you can stick to your plan
Avoid emotional decisionsDo not buy out of fear of missing out, and do not sell out of fear of a passing dip
Trade with your own moneyDo not borrow to trade, and do not use your emergency savings

How Far Can a Stock’s Price Move in a Single Day?

The Saudi Exchange sets daily price limits to protect traders from sharp swings. Under rules announced in 2020 and reported by Mondo Visione, the daily limit for main market stocks is ±10%, with a wider ±30% limit for newly listed stocks during their first three trading days only. When a price hits the 10% limit, a five-minute auction begins and a new limit is set from its result. Because rules can change, check the current limits on the exchange website before building a plan around them.

Frequently Asked Questions About Stock Trading for Beginners

Do I need previous experience to start trading?

No, but you do need to learn the basics first. Start with the beginner guides the Saudi Exchange provides, practice on a simulator or with paper trading, and then move to a small real amount.

Can I practice trading without risking money?

Yes. The Invest Wisely platform describes a simulator for building a virtual portfolio and practicing with virtual money. If it is not available, you can log hypothetical trades in a spreadsheet. Keep in mind that a virtual trial does not recreate the pressure of deciding with real money, so do not rely on it alone.

Is day trading suitable for a beginner?

Short-term speculation is harder for beginners because it demands quick decisions and magnifies both the effect of commissions and the chance of loss. Start with fewer, longer trades, and learn before you speed up.

How much can I earn from stock trading?

Profit is never guaranteed, and you can lose part or all of your capital. If anyone promises fixed or high returns, check that they are licensed by the Capital Market Authority before dealing with them.

Can I use funds instead of picking stocks myself?

Yes, if you would rather not analyze stocks yourself. See our guide to trading exchange-traded funds on Tadawul, which let you diversify with a single trade.

Why is my order not executing even though the price is close to mine?

Most often, a limit order is simply waiting for the price to reach your level exactly. Other causes are that the quantity available at your price is smaller than your order, or that your price does not fit the tick size allowed for that stock. Check the stock screen and adjust your price or quantity if needed.

Conclusion

Start with a clear goal and a budget you can afford, learn the basics, practice before you risk your money, and then enter the market with a small amount and a written trade plan covering entry, target and exit. Review your trades regularly, and remember that discipline matters more than predicting price movements.

This article is for educational and informational purposes only and is not a recommendation to buy any stock or investment advice. Trading involves risk and can lead to the loss of part or all of your capital. Consult a licensed financial adviser before making investment decisions.

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