The First Step in Investing in US Stocks: Master These Trading Rules to Avoid Detours

Image Source: pexels

To take the first step in investing in U.S. stocks, you must first understand trading rules and account opening processes. Mastering U.S. stock trading hours, settlement mechanisms, and account type selection will help you build a solid investment mindset. You can avoid common pitfalls, manage risks better, and improve investment efficiency.

Friendly Reminder: New investors should prioritize learning the basic rules of U.S. stock trading to enter the market steadily.

Key Points

• Understand U.S. stock trading hours to ensure you trade at the right times and avoid missing opportunities.
• Familiarize yourself with pre-market and after-hours trading mechanisms to gradually master these flexible trading periods and enhance trading efficiency.
• Choose a suitable brokerage platform by comparing fees and services to ensure the best investment experience.
• Understand the differences between account types and select the one that suits you to manage investment risks effectively.
• Avoid common investment mistakes, stay rational, set clear investment goals, and increase your chances of success.

First Step in Investing in U.S. Stocks: Trading Rules

Image Source: pexels

Trading Hours

When taking your first step in investing in U.S. stocks, you must understand the official trading hours of U.S. stocks. The major U.S. stock exchanges include the New York Stock Exchange (NYSE) and NASDAQ. The regular trading hours for these exchanges are from 9:30 AM to 4:00 PM Eastern Standard Time (EST). You can refer to the table below to clearly understand the time arrangements of major exchanges:

You need to note that U.S. stock trading hours differ significantly from other global markets. Mastering these hours helps you plan your trades effectively and avoid missing key buying or selling opportunities.

Tip: U.S. stock market holidays differ from those in China/Chinese mainland. It’s recommended to check the annual market closure calendar in advance to avoid failed orders.

Pre-Market and After-Hours Trading

In addition to regular trading hours, U.S. stocks offer pre-market and after-hours trading. You can trade outside regular hours. Pre-market trading hours are from 4:00 AM to 9:30 AM EST, and after-hours trading is from 4:00 PM to 8:00 PM EST. While these periods provide more flexibility, trading volume is relatively lower, and price volatility may be higher.

When trading during pre-market or after-hours sessions, you may encounter issues like low liquidity and wider bid-ask spreads. It’s recommended for beginners to prioritize regular trading hours and gradually learn about pre-market and after-hours mechanisms.

T+1 Settlement and T+0 Day Trading

U.S. stocks follow a T+1 settlement system. Stocks you buy on a given day will have funds and shares settled on the next business day. You should note that while settlement is T+1, U.S. stocks allow T+0 day trading. You can buy and sell the same stock multiple times within the same day, providing more operational flexibility.

Note: If you frequently engage in day trading, your account type and capital size may face regulatory restrictions. For example, Pattern Day Trader accounts must maintain at least USD 25,000 in assets, or trading may be restricted.

When taking your first step in investing in U.S. stocks, you must understand the difference between T+1 settlement and T+0 trading to avoid liquidity issues or forced trading restrictions due to unfamiliarity with the rules.

Price Limits and Trading Halts

The U.S. stock market does not have daily price fluctuation limits like some other markets but has a “circuit breaker” mechanism. When the market experiences significant volatility, trading is automatically paused to help you and other investors make calm decisions and prevent panic selling. Below are the specific circuit breaker rules:

*Level 1 and Level 2 circuit breakers do not pause trading after 3:25 PM ET.

In March 2020, the S&P 500 triggered circuit breakers multiple times due to global pandemic fears. You can see that the circuit breaker mechanism protects market order during extreme conditions. When taking your first step in investing in U.S. stocks, you must understand these rules to avoid emotional decisions during market fluctuations.

Reminder: Individual U.S. stocks may also be temporarily halted due to major news or unusual volatility. You should monitor announcements from listed companies and exchange notifications to adjust your investment strategy promptly.

Account Opening Process and Account Types

Choosing a Brokerage Platform

When taking your first step in investing in U.S. stocks, you first need to choose a suitable U.S. stock brokerage platform. Different platforms vary in fees, services, product offerings, and user experience. You can refer to the table below to compare features of mainstream U.S. brokerage platforms:

When choosing a platform, you can focus on the following aspects:

• Trading and withdrawal fees
• Market and product selection
• User-friendliness of desktop trading platforms
• Quality of research tools

Most brokers offer online platforms with real-time market data, research tools, and portfolio tracking features. You can use these platforms to streamline the process of buying and selling securities for a better investment experience. As technology evolves, platform features continue to improve, helping you make more informed decisions.

Cash Accounts vs. Margin Accounts

When opening an account, you need to choose an account type. U.S. brokers mainly offer cash accounts and margin accounts. These differ significantly in trading flexibility and risk management. You can refer to the table below to understand the key differences:

When you choose a cash account, trading is limited to the cash in your account, with no minimum requirements and lower risk. Margin accounts allow you to borrow funds for leveraged trading, offering higher flexibility but also higher risk. If you plan to frequently day trade, margin accounts require a minimum balance of USD 25,000 and compliance with relevant rules.

You can achieve steady investing with a cash account, where risk is limited to the invested capital. Margin accounts are suitable for experienced investors, amplifying potential returns but also increasing the risk of forced liquidation and larger losses. You need to choose an account type based on your risk tolerance and investment goals.

Tip: Account type directly affects your trading flexibility and risk exposure. Beginners are advised to start with a cash account and gradually learn about the operations and risks of margin accounts.

Account Opening Steps

When taking your first step in investing in U.S. stocks, you need to complete a series of account opening steps. As a non-U.S. resident, you must prepare relevant documents and submit them as required by the broker. The standard account opening steps are as follows:

You may also need to submit the following documents:

• Proof of employment or U.S. visa
• W-8BEN form to certify foreign status
• Possibly in-person application forms

Under the U.S. Patriot Act, non-U.S. citizens face stricter scrutiny when opening accounts, requiring more documentation. During the account opening process, you must ensure all materials are authentic and valid to avoid account opening failures due to mismatched information.

You should also be aware of the following challenges during account opening:

• Be cautious when choosing investments
• File U.S. expatriate tax returns
• Comply with the Foreign Account Tax Compliance Act (FATCA)
• Understand your country of residence’s tax rules
• Currency fluctuations and liquidity risks
• Difficulties in accessing information and legal remedies

You can invest through individual or joint brokerage accounts. Individual accounts have a single owner, while joint accounts are suitable for family members to manage investments together. Brokerage accounts provide access to stocks, bonds, mutual funds, and ETFs, helping you diversify your portfolio, reduce risk, and prepare for long-term growth.

Friendly Reminder: When taking your first step in investing in U.S. stocks, make sure to prepare all account opening materials in advance, understand account types and platform services, and ensure smooth account opening while managing risks effectively.

Trading Fees and Terminology

Transaction Fees

When trading U.S. stocks, you will encounter various fees. Different brokers have varying fee structures. Many mainstream online brokers offer commission-free trading, but you still need to pay attention to other related fees. The table below summarizes common U.S. stock trading fees:

You also need to pay attention to currency exchange fees. Some brokers charge 0.02% to 1% for currency conversion. If you invest in U.S. stock ETFs or stocks, actual costs also include management fees and potential dividend taxes. When choosing a broker, it’s recommended to carefully compare fees to control investment costs effectively.

Tip: Although many platforms advertise “zero commissions,” you still need to watch for hidden fees and exchange rate losses.

Tax Knowledge

As a non-U.S. resident investing in U.S. stocks, you need to understand relevant tax regulations. The U.S. typically levies a 30% withholding tax on dividend income for non-residents. If your country of residence has a tax treaty with the U.S., the tax rate may be reduced to 15%. You need to submit a W-8BEN form to benefit from the treaty rate. Capital gains are generally not taxed unless you reside in the U.S. for 183 days or more. Investment interest income is generally not taxed.

Before investing, it’s recommended to consult a professional tax advisor to ensure compliant reporting and avoid unnecessary tax risks.

Common Terminology

In the process of investing in U.S. stocks, you will encounter many professional terms. Understanding these terms will help you make better investment decisions. Below are common U.S. stock investment terms:

• Stock: Represents your ownership in a company, with value fluctuating based on the company’s performance.
• Bond: A loan you provide to a company or government, earning periodic interest and principal repayment.
• Dividend: A portion of a company’s profits paid to you, typically distributed quarterly.
• Capital Gain: Profit earned from selling an investment, involving tax management.
• Bull Market: A market where prices are generally rising or expected to rise.
• Bear Market: A market where prices are generally falling or expected to fall.
• Market Capitalization: The total market value of a company’s outstanding shares.
• Bid-Ask Spread: The difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept.
• Limit Order: An order to buy or sell a stock at a specified price or better.
• Market Order: An order to buy or sell a stock immediately at the current available price.
• Capital Gains Tax: A tax levied on profits from the sale of assets or investments.

When learning these terms, you can combine them with real-world cases to deepen your understanding. Mastering basic terminology is an important step toward becoming a mature investor.

First Step in Investing in U.S. Stocks: Risks and Pitfalls

Image Source: unsplash

Common Pitfalls

When taking your first step in investing in U.S. stocks, you may encounter common mistakes. Understanding these pitfalls can help you reduce losses and grow into a mature investor more quickly.

• Lack of Research: If you buy stocks without understanding the company, you may face significant losses.
• High Expectations: Having overly high return expectations, especially for penny stocks, can lead to disappointment.
• Failure to Diversify: Investing all your funds in a few stocks significantly increases risk.
• Emotional Trading: Making impulsive decisions due to fear or greed can lead to losses during market fluctuations.
• Unrealistic Expectations: Expecting high short-term returns is often unrealistic.
• Selling Too Quickly: Panic selling during market downturns may lock in losses.
• Ignoring Risk Tolerance: Not understanding your risk tolerance can lead to unsuitable investment decisions.

These mistakes can not only lead to significant financial losses but also hinder your financial goals. You need to stay vigilant to avoid repeating these common beginner errors.

Risk Management

To survive long-term in the U.S. stock market, you must prioritize risk management. Scientific risk management strategies can help you balance returns and risks.
The table below shows the performance of different investment portfolios:

You can reduce risk from individual assets by diversifying your investments. You should also regularly evaluate your portfolio and adjust position allocations as needed. Based on your risk tolerance, allocate assets appropriately to avoid significant losses due to over-concentration.

Investment Mindset

When taking your first step in investing in U.S. stocks, a good investment mindset is equally important. Investor emotions, such as optimism, fear, and greed, can influence market fluctuations. You may make irrational decisions due to loss aversion, overconfidence, or herd mentality.

• During optimism, you may overestimate market prospects and overlook potential risks.
• During fear, you may sell at lows, missing rebound opportunities.
• During greed, you may blindly increase positions, raising the risk of losses.

You need to learn to control emotions and stick to rational analysis. You can create an investment plan and set stop-loss points to avoid emotional decisions. Staying calm and patient is key to achieving long-term stable returns.

Getting Started Checklist

Essential Steps

Before formally investing in U.S. stocks, you need to complete the following five key steps. These steps will help you build a solid investment foundation and reduce unnecessary risks.

1. Understand personal brand knowledge. You can review the products and services you use daily and consider whether those companies are worth investing in. This helps you form your investment logic.
2. Master fundamental analysis. You need to focus on key financial metrics like company revenue and earnings per share (EPS). These metrics help you assess a company’s profitability and growth potential.
3. Learn to use technical indicators. You can observe stock price charts and trading volume to identify market trends. Technical analysis helps you time your trades.
4. Perform mathematical calculations. You should quantify the risk and potential return of each investment and understand stock valuation methods. This helps you avoid blindly following trends.
5. Define investment goals. You need to plan your short-term, medium-term, and long-term goals. Clear goals help you avoid emotional decisions.

It’s recommended to keep records at each step and periodically review your investment approach and processes.

Important Reminders

When investing in U.S. stocks, you also need to pay attention to the following:

• Choose a compliant U.S. stock broker, prioritizing channels that support deposits from licensed Hong Kong banks to ensure fund safety.
• All trading and account-related fees are denominated in USD. You should monitor the impact of exchange rate fluctuations on investment costs.
• Understand U.S. market trading rules and tax policies, and prepare required materials in advance to avoid delays in account opening or trading due to incomplete documentation.
• Study thoroughly before investing and maintain a rational mindset. You can use the broker’s simulated trading features to gain practical experience.

Before each trade, double-check information to avoid losses due to oversight. Continuous learning and summarizing experience are key to becoming a mature investor.

You have now mastered the basic rules of U.S. stock trading and the account opening process. You can follow these steps to start your investment journey:

1. Decide how to invest in stocks.
2. Open an investment account.
3. Choose stocks or funds to invest in.
4. Determine the investment amount.
5. Create a realistic long-term investment plan.
6. Manage your investment portfolio.

Continuous learning and rational thinking are crucial. The table below highlights the advantages of rational investing:

You can reduce the impact of emotional and behavioral biases through self-reflection and systematic decision-making frameworks. This will help you achieve long-term stable growth in the U.S. stock market.

FAQ

What documents are needed to open a U.S. stock account?

You need to prepare a passport, proof of address, tax identification number (e.g., ITIN), and employment and financial information. Some brokers also require a W-8BEN form. Prepare all materials in advance to ensure a smooth account opening process.

How can non-U.S. residents deposit funds?

You can deposit funds via international wire transfers through licensed Hong Kong banks. Some brokers support third-party payment channels. You need to pay attention to exchange rates and fees. All funds are denominated in USD.

What are the main fees for U.S. stock trading?

You will encounter commissions, clearing fees, management fees, and currency exchange fees during trading. Many platforms offer commission-free trading, but you still need to watch for hidden fees and exchange rate losses.

What taxes do non-U.S. residents need to pay when investing in U.S. stocks?

Dividend income is typically subject to a 30% withholding tax. Some countries have tax treaties with the U.S., reducing the rate to 15%. Capital gains are generally not taxed. You need to submit a W-8BEN form.

Does T+1 settlement affect fund usage?

Stocks you buy on a given day settle on the next business day for both funds and shares. You can engage in T+0 day trading, but funds are fully available only after the T+1 settlement.

By mastering U.S. stock market trading rules, you’ve gained essential knowledge on trading hours, settlement mechanisms, and account types, laying a solid foundation for confident investing, but high cross-border fees, currency volatility, and complex offshore account setups can limit your ability to act swiftly on U.S. market opportunities, especially during pre-market, after-hours, or day-trading windows. Imagine a platform offering 0.5% remittance fees, same-day global transfers, and zero-fee contract limit orders, enabling seamless trading strategies through a single account?

BiyaPay is tailored for U.S. stock investors, providing instant fiat-to-digital conversions to seize market signals nimbly. With real-time exchange rate query, monitor USD trends and transfer at optimal moments to cut costs. Covering most regions with instant arrivals, it powers rapid allocations to S&P 500 ETFs (like SPY) or trending tech stocks. Crucially, trade U.S. and Hong Kong markets via one account, leveraging zero-fee contract limit orders for technical or fundamental-based strategies.

Whether capitalizing on pre-market moves or navigating settlement risks, BiyaPay fuels your edge. Sign up now, visit stocks for U.S. prospects—quick setup unlocks cost-effective, data-driven investing. Join global investors and thrive in 2025’s markets!