Stock Trading Tips

Is Online Trading For you

If you haven’t thought about buying & selling stocks online then you’re in the minority. Everyone with an internet connection has often pondered on whether to invest their hard earned cash online or not. With the advent of the internet, it has become ridiculously easy to make an investment in the stock market. Millions of people with no investment experience take the plunge every year, some succeed but more often than not they fail; many, victims of investing scams or just investing in the wrong stock at the wrong time.

The reason so many fail at investing is because they don’t really understand the risks involved stock trading or how turbulent the markets can be. They take an online course or read an eBook & they think they have the solution that has evaded everyone else. This of course is nonsense for the most part, true, there are some trading systems that do make money every month but you’ve got to work at it, you have to become informed, you have to know what your risk tolerance is.

Stock Trading Tips
The best way to go about trading for the first time is to practice first rather than risking your hard earned cash. You can do this by what is known as paper trading. This is a process whereby you select a stock which you think will rise in price, you write it down with the time and date, you can also enter it into an online paper trading stock trading system. There are many of these trading systems on the web today, they set you up with a couple of thousand dollars in fake money, you have real time access to the markets so you can trade as you would normally, the only difference is that you’re trading with fake money. This is a great way to learn the stock market without getting burned.

Stock Trading Investing
So where do you start out when you decide to start trading for the first time? Well this is the big question which the majority of novice traders will ask. Where is the money? Well, the answer to that is everywhere! You see, the stock market is awash with money, it’s just a matter of getting to it before everyone else does. The only way to do this is to write out a plan which you’ll stick to in the long run. All too often we see people starting out in the stock market & investing in everything, they’ll invest in common stock, options, futures etc. This is the wrong way to go about it because it won’t be long before you lose your shirt. You have got to be smart when it comes to online trading; you have to have a plan which you are in complete control of. You have to do some split testing to see which process works; this is the only way to succeed in the market today.

Automated Trading
Where most fail is by listening to too many gurus & not learning the process themselves. You have got to test your strategy & you’ve got to test it in different market conditions. So let’s say you want to trade earnings for a living, you’ll pick your stocks & invest your money, right? Wrong, you need to test it first by opening a dummy stock trading account & start paper trading online for a while. After a while you’ll see what works & what doesn’t & you’ll have a lot more cash in your pocket as a result. This is the only proven method of making money online, you must take responsibility for your own trades, you must know in advance what the outcome is going to be, well at least 80% of the time anyway.

Practice trading
So, our advice to you is to firstly open a dummy account, just do a Google search for one. Once you’ve setup your account you can then start to think about how to go about investing. I would start trading with common stock, it’s the easiest way; most people just trade common stock for their entire lives & are quiet happy to do so. Now you have to decide on a stock which you believe will go up in value in the near future. This can be quiet difficult if you don’t know what you’re doing but if you have a process in place, it can become really easy to spot a winner. You can use tools like Clearstation which is a great site for picking stocks which are about to break out. Pick a couple of stocks from their A list, make a note of where they are on the charts provided, take a screen shot of these charts & save it to your hard drive, by doing this you can see what the stocks charts were like when you picked them. Eventually, you’ll begin to see some patterns emerging, this is where you want to be, this is the way many traders make money.

Stock Trading Programs
Next, you’ll need to enter your day trading stock picks into your dummy stock account, invest a few thousand fake dollars in each. Remember to check when the earnings of these stocks are coming out; you don’t want bad earnings playing havoc with your investment, even if it’s just fake money. So by now you should have some good stocks picked and entered into your dummy trading account, all you need to do now is keep an eye on these and see whether they go up or down. This can be slightly tricky if you don’t know what you’re doing, in other words if you don’t have an exit strategy in place you could lose the lot. Always have an exit strategy in place before you enter into a trade, if you don’t have an exit strategy then you’re asking for trouble.

Trading Tools
How do i calculate my exit strategy? Well this can be tricky but if you just select a standard exit point for all stocks you purchase then it can be really simple. I prefer to set my exit at five percent. So for example you buy 100 shares in xyz stock at 10 dollars each then you’ll need to set your sell execution at 5% less than 10 dollars which is $9.50. This is just a standard but in reality what you’ll need to do is enter your stock ticker into charting software like yahoo finance & take a look at the stock over a five day period. During any day, take a look at how much the stock rises & falls, does it drop below your exit point, if so then you’ll need to drop it further. Take a look at the following day & compare it to the previous day to get the intraday reading, does the stock fall below your exit point? If so, then you’ll need to change it, by doing this we’ll be able to protect ourselves from the ups & down of the market which is mainly caused by day traders buying & selling these shares.

Short Term Trading
Once we’ve set our stop loss & we’re confident that the stock won’t drop below this, we can then sit back & relax. There’s no point in watching this stock every hour or so at this point. We only need to look at these stocks every days or so, some only check every few days as they don’t want to make knee jerk decisions when the stock starts falling. You have got to get into the mindset that when your stock starts falling which it will now and again, that you have your stop loss set so it doesn’t matter as the stock will sell if it hits your exit price. The only reason you’ll need to check your stock is to see if it’s rising in value. If it rises in value, then you’ll need to raise your stop loss by a few more percent. If the stock keeps rising, you’ll eventually set the exit price at the price you bought it at so if the stock starts to fall in price then you’ve lost nothing. To make this work we need to stick to short term stock trading when starting out, only trade a stock for two weeks at the most. This is where every trader needs to be, they need to be in complete control & they need to know how to exit the market. Once you discipline yourself this way, you’ll find that you’ll have more winning trades than losing ones, you’ll never have to deal with that emotion of selling or holding on to a stock again, it will all be automatic, it will all be setup in advance by you.