First, a disclaimer: this site does not provide personalized or directional investment advice, and we are not responsible for any investment gains or losses.

The stock market involves risk, so invest with caution! U.S. stocks keep hitting new highs, so invest with caution!

U.S. stocks have been an easy way to make money for quite a while, while bank interest rates have kept falling, so this is a good time to organize some basic investment information. This article mainly covers U.S. stock information related to my own trading experience. I discuss brokerage and investment accounts in other articles.

Advantages of U.S. stocks:

U.S. stocks have some broad advantages, such as a stricter legal framework and a more developed trading system than China A-shares.

The main regulator directly tied to stocks is the U.S. Securities and Exchange Commission, or SEC. Beyond that, there are multiple layers of oversight from courts, agencies, accounting firms, law firms, and other watchdogs. Penalties can also be severe, and violations can have devastating consequences.

In my view, a more developed system offers relatively better protection for smaller investors, making it less likely that a stock will suddenly drop 10% every day for a week because of market noise.

Leading companies across nearly every industry around the world are listed in the U.S. That gives investors more high-quality choices.

Investment returns in recent years have really been very strong.

Regular U.S. stock market hours:

9:30 – 16:00 EST, U.S. Eastern Time, with no midday break

Availability of pre-market and after-hours trading depends on the broker you use.

The three major stock indexes:

Dow Jones Industrial Average - Dow Jones Industrial Average

This is an arithmetic average stock price index. The Dow Jones Index is the oldest stock index in the world, and its full name is the stock price average index.

It is compiled using a selection of representative companies listed on the New York Stock Exchange, and consists of four stock price average indexes:

① The Dow Jones Industrial Average, based on 30 well-known industrial companies;

② The Dow Jones Transportation Average, based on 20 well-known transportation companies;

③ The Dow Jones Utility Average, based on 6 well-known utility companies;

④ The Dow Jones Composite Average, based on the stocks of the 56 companies included in the three averages above.

S&P 500 Index - S&P 500 Index

All companies covered by the S&P 500 Index are listed on major U.S. exchanges, such as the New York Stock Exchange and Nasdaq. Compared with the Dow Jones Index, the S&P 500 Index includes more companies, so risk is more diversified and it reflects broader market movements. The companies in the index are adjusted from time to time based on economic conditions.

Nasdaq Composite Index - NASDAQ

The Nasdaq Index is a stock price average index that reflects changes in the Nasdaq securities market, with a base index value of 100. Nasdaq-listed companies span all major new-technology industries, including software and computers, telecommunications, biotechnology, retail, and wholesale trade.

Characteristics of U.S. stocks:

No daily price limits, but there are circuit breakers

If an individual stock moves more than 10% within 5 minutes, trading must be paused. If the stock price does not return to the required "price fluctuation range" within 15 seconds, trading will be halted for 5 minutes. For major indexes, a three-tier circuit breaker system applies: when the index falls 7%, trading is paused for 15 minutes; when it falls 13%, trading is halted for 1 hour; and when it crashes 20%, the market is closed for 1 day.

You can buy just 1 share

Once you meet the account-opening requirements, even 1 U.S. dollar can be used to participate in trading! :D

Margin and short selling are available (leverage/shorting)

A margin account is required for margin trading and short selling, just as in China, and it must be separately enabled. Check with your broker for the specific requirements.

Margin trading means using cash or stocks in your account as collateral to borrow more funds from your broker to buy stocks, then repaying the principal and interest within the agreed period. In general, brokers may offer 4x intraday leverage and 2x overnight leverage.

Short selling means using cash or stocks in your account as collateral to borrow shares from your broker and sell them, then buying them back later at a lower price and returning them to the broker, profiting from the price difference.

Both individual stocks and indexes can be traded this way.

T+3 settlement for funds

In a cash account, a trade is not fully cleared and settled until the third business day after the transaction. T refers to the purchase date. If you hold a stock for more than 3 trading days before selling, the sale proceeds can be used immediately (to buy other stocks, which may also be sold the same day). If you sell less than 3 trading days after the purchase date, you must wait until the full 3 trading days have passed before the funds can be used. If you use those sale proceeds to buy another stock, you cannot sell that new stock until 3 days after the T date, or it will be considered a violation. More than 3 violations within 12 months may result in a 90-day restriction.

T+0 stock trading

This is day trading: buying and selling the same stock on the same day. Small investors face restrictions on intraday trading. If you make 4 or more day trades within 5 trading days, and those trades account for 6% or more of your total trading activity during that period, you may be labeled a Pattern Day Trader. A typical day trader's account must have at least $25,000 in assets. If the account balance is below $25,000, the account may face a 90-day restriction, or until the investor brings the account value back up to $25,000. This mainly affects three kinds of accounts:

Cash account:

No matter how much money is in your account, you can only day trade if the funds have already settled. Otherwise, you must wait for settlement before selling the stock, or you may be restricted from trading for 90 days. For example, if your funds have settled, a stock you buy today can also be sold today. But if you then use those same funds to buy again, you must wait for the 3-trading-day settlement period before selling that new stock. No matter how much the stock drops during those three trading days, you cannot sell it. Don't forget that U.S. stocks do not have daily price limits, so even an 80% drop in three days is possible. If you sell in violation of the rules, you may be barred from trading for 90 days.

Regular margin account:

The total account value is over $2,000 but below $25,000. The trading rule is T+1, but within 5 trading days, you have 3 opportunities for T+0 day trades. If you make a 4th, the account may be restricted from trading for 3 business days while waiting for settlement. After settlement, it will automatically be converted to a cash account and remain in cash-account status for 90 days. After 90 days, you can reapply for margin privileges.

Day trading account:

When your margin account's total assets exceed $25,000, and the account stays above $25,000 for one straight week while you make 4 day trades, and those day trades account for more than 6% of your total trades during those five days, the account is automatically classified as a day trading account. Once the account becomes a day trading account, the T+3 settlement restriction no longer applies.

Two investment approaches

Broadly speaking, U.S. stocks are well suited to the following two approaches:

Medium- to long-term investing

You can choose to hold individual stocks, or invest in indexes.

Back when I traded domestic China A-shares, it felt like there was rarely any true medium- or long-term investing. The clearest example is that 10 years after the 2008 financial crisis, U.S. indexes had tripled, while China A-shares were still struggling around 3000 points. When I first started with U.S. stocks, I was still in school and had little guidance or accumulated experience. I was mostly just experimenting, so I bought some stocks that seemed easier to manage: large-cap companies, big businesses, and industry leaders such as Coca-Cola, McDonald's, and Walmart. I didn't really understand companies like Apple or Microsoft at the time, and their share prices were high, so I didn't buy them.

These companies are major players in consumer staples, not just in the U.S. but globally. They are large-cap index components and relatively stable, with strong underlying profitability. Regardless of broader market conditions, their price movements tend to be relatively smaller. The advantages are convenience, stability, and lower risk, but when the market is strong, their upside tends to be more limited.

Ultra-short-term trading

Because individual U.S. stocks do not have daily price limits, this style can generate very strong returns, but it also comes with extremely high risk. Beginners should generally avoid it, because it requires sharp instincts and a lot of experience. Once you are better able to analyze both the fundamentals of the broader market and stock-specific news, you can start making your own judgments in ultra-short-term trading.

In U.S. stocks, in addition to paying close attention to earnings reports at different times, information is also extremely valuable. Getting news even one minute earlier can produce a massive difference in returns. Bullish and bearish news works in much the same way as in China A-shares, and this is also where leverage and short selling can come into play. The simplest idea is to use leverage on bullish news and short on bearish news.

Learn the stocks and industries you want to invest in

If you want to make money from a stock, you need to understand it. Learn about the industry and the company itself, including earnings reports, company-specific information, news, and even your own outlook on the stock and the industry.

To research individual stocks, I usually use Yahoo Finance. It's fairly general, but enough for me, and I mainly use it to review financial information and learn more about a stock.

For real-time news, I use MarketWatch and Bloomberg, which are more than enough for retail investors. Bloomberg also has a TV version for morning market coverage.

For charting and trading analysis, you can use TradingView. It works for both beginners and professionals, whether you just want to view indicators or build your own scripts and custom setups. There are both free and paid versions.

If you want to learn more about investing, you can use Investopedia, which is easier to understand.

How to trade

You can trade U.S. stocks yourself through a broker, or you can authorize a broker or wealth management firm to trade on your behalf.

Related articles

Don't forget to check out our recommended articles on various U.S. stock trading platforms!

Stock Investing Basics

Below are a few commonly used U.S. stock brokerages, along with their signup bonuses.

Overview Signup Bonus Quick Take
Moomoo $1,030 in stock + 8.1% APY Professional platform, no commissions, and free Level 2 market data. Good for both beginners and advanced traders. Chinese-language customer service available. Requires SSN.
TradeUp 50 shares of NVDA + chance to win 5 more shares + 4% for three months No commissions, supports both U.S. and Hong Kong stocks, and offers WebTrading. Chinese-language customer service available. Available globally.
Webull $100 Amazon + 12 fractional shares + 1 month of Premium membership No commissions, with frequent deposit bonuses that give free stock.
BBAE Up to $650 bonus 0 commission, 0 fees; Chinese-friendly, and you can open an account without an SSN/ITIN.
Robinhood 1 free stock No commissions, with an interest-bearing cash account option. Simple interface that works well for beginners.
Interactive Brokers Up to $1,000 Broad market access. Professional, comprehensive trading platform with high interest on cash balances.
TradeStation $250 Professional trading platform with a full set of supporting tools.
Schwab Up to $1,000 Professional and easy to use. Global ATM fee rebates and $0 stock commissions.
Fidelity Brokerage Account Sign-up link Well-established brokerage with no trading fees, plus TurboTax included.
BIT (formerly Matrixport) $400 in stock Supports direct crypto deposits and withdrawals, does not participate in China CRS, and allows registration directly with an ID card.
SoFi Invest $75 for opening an account No commissions and supports Stock Bits.
WealthFront $5,000 managed free Automated investing and wealth management.
M1 Finance $10 for depositing funds No commissions, with automatic investing based on your portfolio allocation.

If you do not have an SSN/ITIN but still want to trade U.S. stocks, take a look at the brokerages/platforms below. All of them allow registration using a full set of Chinese documents, and you can sign up with just an ID card or passport. None of them participate in China CRS.

  • BBAE: Chinese-friendly; you can open an account without an SSN/ITIN.
  • BIT (formerly Matrixport): You can open an account with just an ID card, and approval can be completed within a few hours.
  • Bitget: Identity verification can be completed with an ID card/Chinese passport.