Stock Trading: How to Invest Safely and Stress-Free
Not All Investments are Risky: Even in the Current Economy
The stock market might be the last place that people would like to put their money right
now, considering the economic weather right now. Prices are sky high, bailouts of major
institutions are in the works and the common man is beyond worried. The hand wringing
and ominous clouds of doom have started for many, and they are considering stashing
their remaining cash under the mattress until things take a turn for the better.
That being said, there are investments that are not as risky as others, and they actually
can be well worth the effort of finding them. If you are new to the stock market or even
if you have traded before, it is wise to keep a few things in mind for your own financial
protection. Educate yourself before undertaking any investment plan, even the least
risky options do carry risks, none are zero risk. Know what your tolerance and loss cap
are before proceeding. Speak to your financial planner about your budget and your
projected profits for the coming fiscal year. Know what you can risk and be comfortable
with losing that amount so there are no horrible surprises down the road.
Working with a broker can make your trading activity easier- they can guide you to a
block of stocks that are giving fair returns for a minimum investment, which is exactly
what you want to start with. Nobody dives into the stock market and makes a killing on
their first trade, what you want to aim for is slow and steady, consistent performance.
Stocks that blow up all of a sudden also have the potential to tank just as fast.
Brokers can also guide you to the right trade analysis software so that you can track
your own stocks. Once you become proficient at tracking these trades, you can start
selecting some of your own. Use the profits from positive performance stocks to reinvest,
and do not use any of your own ready cash to further extend yourself in the
market. Start pulling some of these profits back out of the market and putting into
interest bearing accounts, while using the rest to invest in more diversified stocks and
other financial products. A diversified portfolio is an absolute must, if one of your stocks
trends downward, you will still have others to keep your head above water for the time
being.
Do not work with a stock broker that pressures you into stocks or other tools that sound
risky, no matter how unqualified you think that you are. If you just heard mention of
trouble with a stock or a company and that is what you are being pushed to buy, that is
a serious problem. Do not get tied into thinking that you have to work with just this
broker. If the partnership is not working out for you, move on and find someone else to
handle your investments.
You can find lower risk investments by reading the financial pages and logging on to
financial websites. If you can understand the charts and analysis, you will have a leg up.
Education is key to solid investing; so do not accept the words of a broker as law. Know
a little bit about the types of trades that you would like to see made on your behalf and
what kind of companies that you would like to invest in. There are some that will be solid
performers no matter what the economy looks like, and there are those that are folding
left and right. Keep your head up and do not be afraid to put your foot down if you feel
uncomfortable with a recommendation.
The Long (Term) and Short (Term) of It
Between the two, short term trading is by far, the more risky option. Long term trading
requires more careful consideration and movement, and therefore gives the trader time
to reconsider or to find out more information before proceeding. Short term trading
usually is quick moving and you must realize that very few people ever have more than
very fleeting success in the short term trading market. Knowing this, if you still choose
to proceed, do so cautiously. Be vigilant that you remain under your loss cap and know
your limits at all times.
Short term trading requires that you know quite a bit of knowledge up front. You must
know the stock that you are looking to trade inside and out- its trends, its volume, and
its volatility. You must know what this stock has been doing prior to the present, and
what it is most likely to do in the near future. If you are at all unsure about any of the
aspects of the stock, then do your research before even thinking about investing at this
point. Losing all of your money on one ill-planned investment block is not going to help
anybody in the long run.
Look at the stock’s trend. How is the stock behaving from day to day? While most short
term traders will be satisfied with tracking a stock for one or two days, the more
cautious trader will wait until they have compiled at least a week or two’s worth of
information so that they can see what the average trend looks like.
Volatility is the actual movement of the stock market; are there many moves in either
direction? Is the market heading up in a large surge or plummeting downward? Or has
the market flattened out and turned stagnant? Knowing this information is vital, because
it could indicate whether there is a system wide trend beginning or if a positive or
negative trend affects only one or two isolated stocks.
Volume simply refers to the number of buyers or sellers of a particular stock and can be
indicated by the other information in most cases. Volume can be affected by small
traders selling of one or two blocks of stock or larger traders selling larger amounts of
their own stocks. Either way, the volume of trading will indicate whether it is a hot
seller’s market or a more cool, buyer’s market.
Volume, volatility and trend are important aspects for choosing your short-term
investment stocks, but it is important to be equally informed about the next step in the
trading process. You know how to choose hopefully the right stock, now do you know
how to proceed with the actual trading of it?
Within short term trading, there are several types of trading that goes on. Of them,
there are some that are more common and some that are less used for the short term.
Before you even begin to trade, no matter what type of trading that you choose to do,
you should have an exit strategy in case your selections start heading south. Do not
remain in a bad situation if there is a chance to exit, do so. If you pull out before you
lose all of your money, you could always reinvest in a different stock, something you
could not do if you do go belly up.
Trend trading is not often done as short term trading. It takes a long time to calculate
and chart the trends of a stock and the short-term trader just does not wait around for
this information. Of course, there are some moments when the short-term trader will
use “trend” as a factor for choosing a stock, but that is not the most common.
Counter trend trading does lend itself most easily to short term trading. You must have
some quick cash available to jump on the sudden reversals of trends in certain markets.
Once these counter trends are spotted, they become fast moving, hot commodities and
if you are lucky enough to jump on it fast enough, you can turn a quick profit.
Breakout trading is another short term trading strategy that requires careful market
watching. The trader that uses this strategy will buy a stock as soon as it starts to move
up after a period of either little or lateral movement. The opposite of a breakout trend is
a “breakdown” where a similarly stagnant stock suddenly takes a turn toward the
negative.
Buying stocks that had been strong when they are temporarily weak or vice versa is
called “pullback trading” and can be viewed as trading that not only takes advantage of
these stock’s situation, but also as a method of returning a stock back to its previous
levels.
Knowing all of the stock information (volume, trend and volatility) and the short term
trading types (trend, counter trend, breakout and pullback) is not enough for success in
the short-term market. You must understand that you still need to have solid business
savvy and some good fortune. You still must stay below your financial limits, never
exceed your own personal loss cap even if you are guaranteed a “sure thing”. Financial
experts rarely agree on anything but they do on this key fact: the most important thing
to consider for short term trading success is discipline. If you have no self-discipline, find
another outlet, short term trading is simply not for you.
On the other hand, long term trading takes all of the above traits and one other as well.
For the long-term trader, patience can be the key to their ultimate success. Knowing
which stocks are going to have a cooling off period followed by a huge upswing can be
vital to their moves. They wait like a chess player for the moves to unfold before them
before they pounce, snagging stocks that will double or triple in value in the fullness of
time. Being able to accurately predict what these long-range trends can be will make you
a very wealthy long-term trader, indeed.
Another often overlooked factor to give long term the advantage over short term
trading is the actual costs of trades and losses per year. Say you are working with a
broker who is (for simplicity) making a nice round, ten percent commission on every
trade that you make. If you lose money on that particular trade, you are out not only
that amount, but also the ten percent commission, every time. For the short-term trader
who makes many trades, that can really add up quickly. The long-term trader will still
pay commission, but they will pay far less in commission costs throughout the course of
the year because they make far less trades within the course of the year. It is simple
and straightforward, but somehow the short-term trader fails to see it. Plainly stated,
the short-termer is paying to lose his money. Does that sound financially responsible to
you?
For our example, let’s use a ridiculously low amount of money just to simplify things:
Joe, has told his broker, Bill that he would like to buy 7 shares of ABB, a communications
company. The price for the shares is $100, giving Bill a commission of $10. Joe did not
fully investigate ABB and the stock tanks the following morning, leaving Joe with a
handful of worthless stocks. He is now out $110 for this one trade.
Joe and his broker, Bill make several other similarly priced trades- about one half of
them fail miserably. If Joe has made four such ill-advised trades per month, for the year
he has made 48 trades at a cost of $4800. Bill’s commission would be $480 for the year.
But, because half of them have failed, Joe has actually paid out $2641 in losses for this
year. It may not sound a lot, but if we were using more realistic stock trading figures,
the amounts would be more frightening. Regardless, If the slightly more than $2600 is
above Joe’s loss cap; he will be feeling the pinch. Of course, stockbrokers do not walk
away from trades with ten bucks in commission, but the formula is the same no matter
what the amount involved.
Although it would sound strange to say so, financial experts suggest that long term
trading actually takes less time for analysis – in the long run. Because the long-term
trader uses data that has been compiled weekly, it will only take the time to download
and review it once. On the other hand, a day trader, at least one who has any kind of
success, will have to be reviewing prices and other statistics throughout the entire
trading day. The minute they walk away from their computer screen, a stock-block either
blows up or tanks, and they will have missed it completely. On the other hand, the longterm
trader will know before hand that the stock is about to move up or down- because
they have down the research and know what is about to occur.
The more diversified your portfolio becomes, the more important careful monitoring of
your assets and their trends will be. Do not think that because you are watching a
stock’s trends, that you will be able to account for every inevitability- even with the most
careful stock analysis and the most cautious of trades, there can be issues beyond
anyone’s knowledge.
Diversification is a good idea, regardless of whether you are a careful, cautious longterm
trader, or a fast, more aggressive short-term trader. In fact, the wise trader is
probably a blend of both, employing a portfolio that not only encompasses steady, but
positive trending stocks and the potential explosive capabilities of short-term trades. No
matter what system you trade, no matter what market you trade on, and no matter
what type of financial instrument you trade, the key factors remain the same. Education
is step one, before even making that first trade. Once you have thoroughly educated
yourself, then you must decide what your personal financial goals are and how quickly
that you realistically expect to reach them. You must go over your discretionary budget
and decide from the very outset what your loss cap is and have a plan to exit if it looks
like you will be near that cap. Do not allow yourself siphon every single cent of profit
that you make back into the stock market. The key is to know how to further your
investments while still allowing yourself to reap the rewards of your prior hard work.
Diversify your portfolio as well as your trading methods. Invest in a few short-term
trades that will hopefully give you a quick confidence boost as well as some monetary
gain. Take part of this money and reinvest it, choosing slower building, but less risky
long term trading this time. Look into, not only traditional stocks, but futures,
commodities and currency trading if you feel that you are ready. Do not allow yourself to
be talked into something that you are uncomfortable with by a high-pressure broker. The
broker is supposed to make trades on your behalf, and should not be trying to make
your final decisions. Remember, he has your commission to earn, and if he is pushing
you or consistently making bad recommendations, then he is not the right broker for you
and you should move on. And finally, remember that unless you have decided to make
day trading or other stock trading your life’s work, this is a sideline and should not
consume all of your time. If you have to stop everything that you are doing to check a
stock price, or make a call to a broker, you may have become too immersed in the
trading life and might need to pull back just a little bit.
Tracking a Stock’s Performance: Just a Click Away
Once upon a time, the only people that had vital stock information were brokers. They
would all huddle around the ticker and watch as little blips and dots told the fortunes or
loss thereof of countless companies across the country. News of the foreign markets was
virtually unheard of at the time, and there was very little getting out to the general
public about which stock was performing in what way. That began to change as more
and more people became involved in the Market, and news journals began their storied
run. Then came television- with nightly news broadcasts that would touch on key
financial stories as the lucky few huddled around their set in wide eyed wonder. As the
infant TV grew and become more common, more and more financial shows made it to
the airwaves. Soon there were whole cable networks dedicated to finances- twenty-four
hours a day you could tune in and find an expert and listen to their expressed opinion. In
the very next hour, you could watch another expert and listen to him express the direct
opposite opinion and on you could go.
But, the world moves even faster than all that right now, and nobody can sit for hours
watching expert and expert tout differing viewpoints. How do you filter out all of the
background noise? How do you make the decision that this one is right, while that one is
not? How do you know which expert to listen to when there are so many to choose from?
And, the television personalities rarely, if ever, agree with the hardcopy news journals.
No wonder so many people are far too afraid to venture into the investment world. It
might not even seem worth it to them to wade through all of this conflicting information
for a little bit of return.
Technology has thrown in yet another option however and it is just as close as your
television, but can be far more informative and far more up to date. The Internet allows
us to get more real time stock tips and trade information so that we can make analysis
on our own, or compare information with our brokers. Stock trading software can give us
the tools to understand all of the charts and other information that is simply a mouse
click away now. Knowing a stock’s trend can be a matter of pulling up a site and filling in
a few simple blanks.
Trading software can be useful, no matter whether you are a day trader (or other short
term type trader,) or a long term-trader. The right software can allow you to make sense
of countless bits of information, which can be downloaded and updated at regular
intervals right to your home computer. You can set the software to send you alerts when
there has been substantial movement on the stocks that you choose, or you can check it
when you choose to, but either way, the software can make it easier to manage.
No matter where you get the information, stock analysis looks at several factors, called
its “trend”. These factors are volume and volatility. Volume, you will recall, is the
amount of shares that are being moved for a particular stock. Volume is described in the
financial journals as either “thin” or “heavy”. In hard copy journals, volume might be
noted in special type if there has been a change (either positive or negative) of more
than a set percentage. Online reporting of a stock’s volume will be updated frequently, in
many cases as often as every half an hour or less. Regardless, you must understand
that volume is only one factor to consider when analyzing a stock and its potential
performance in hopes of adding it to your portfolio.
Volatility is referring to the market itself rather than to individual stocks. It is the
movement, up or down, or in some cases the lack of movement that will indicate either
heavy, light or no trading is going on. Again, as with volume, this is only one factor to
look at, and for a real analysis, more information will be needed. You must look at all of
the key factors before making any decisions, regardless of how safe and risk free you
think that they are. Do not go off thinking that you can just make a trade and sit back
and rake in the dough, it just does not happen that way, at least not in real life.
Analysts look at each factor individually, and then as a whole. You must be able to
understand how each piece of the puzzle fits together and what they can mean to your
financial outlook and the potential movement of your stocks and other financial
products. Volume is rarely used by the short-term trader because one day’s information
on volume does not yield any usable information, however volume usually does tell how
well a stock is moving, but not always why it is moving so much. If a stock has been
fairly stagnant for a week or more, and then suddenly spikes up or down, there might be
an issue in the air, and should bear careful watching before making any large moves on
your part. Analysts use volume for other information as well and to track possible
trends. The five basic rules that are used by technical analysts that deal with volume
are:
1. If prices are up, or going up and volume is increasing, then prices will most likely
continue to rise.
2. If prices are up, but the volume is faltering, then those prices will either increase
more slowly or they will start to fall back off.
3. If prices are down already, and the volume is up, then prices will go down even lower.
4. When both price and volume are falling, prices will either slow down or they will slowly
start to go up.
5. Flat volume has not impact on stock price at all. That which is neither rising nor falling
defines flat volume.
Remember, stock prices change when they are being bought or sold- prices will either
rise or fall depending on which direction the volume is heading. There are no rules set in
stone for the stock market, which is by its very nature a very unpredictable thing to deal
with. If there was a way to know everything ahead of time, then there would be no
financial risks associated with investing in the market at all, and there would be no need
for analysts, advisors or planners.
How To Most Closely Monitor Your Stocks
Babysitting some stocks is almost a necessity as they make wild moves up or down. If it
looks like your stock is about to take a full on header, you want to know that information
so you can dump it before it falls, dragging your hard earned investment dollars with it.
On the other hand, if a stock is about to blow up in a huge way, you want to be prepared
for that as well, perhaps even redouble your investment efforts as soon as possible.
Knowing the trends and what could possibly be coming can be important for a large
number of reasons, but the bottom line should always be protecting your own bottom
line.
Back in the day when your stocks were monitored a broker, brokers would occasionally
answer the phone, or sometimes return your every thirtieth call. This could get a little
nerve wracking, especially once the broadcast news aired or the hardcopy journals were
delivered. Can you really afford to wait for a return call, when you are reading the news
about some huge movement that could potentially make or break your portfolio?
Thankfully, for the most part, those days are long past. The Internet has made the
stock market more accessible and more user friendly for even the most casual trader to
deal in. It has also made real time, up to the minute stock monitoring a reality. Where
once your updates were hours or a full day old, online information is updated about
every twenty minutes or so. In less than half an hour, your fortune can change and now
you will know all about it right as it happens.
Stock trading software can make keeping track of your trades as easy as entering a few
numbers and then waiting for the alerts to begin. Various forms of the software are
available and it should be easy to find the one that best suits your purposes most
closely. Some software will follow the charts and give you the details in straightforward,
easy to follow language, rather than forcing you to wade through page after page of
information. The various charts can be confusing, especially for the newer trader so the
tracking software can be a sound investment for your trading future.
Financial cable programs feature a scrolling a stock ticker, and also feature breaking
news stories as well- monitoring your stocks while watching a financial program is as
simple as looking at the bottom of your screen. Of course, in the world of high finance,
traders often do not have the time to sit and watch television no matter how beneficial
the program can be to their trading successes.
Monitoring your stocks is important, not only to be aware of negative movements, but
when positive changes occur as well. If you are a savvy trader, you know that you
should be splitting your gains into reinvestment as well as more secure savings. The
faster that you make these moves, the faster your money can grow for you.
Finally, monitoring your stocks closely can allow you to know when it is time to make a
move on a stock that is about to move in one direction or another, and to buy up new
stocks that have started performing favorably. Vigilant monitoring can allow you to
diversify your portfolio faster than your original financial plan had indicated that you
would be doing so. Making your financial goals ahead of time is always a good thing.
Long-term traders may track trends and stock volume less than daily, but rest assured
that they do not go several days in a row without at least a quick check in on their
stock’s performance. Even long-term stocks can have sudden fluctuations and the trader
knows that they must be ready for anything, be it good or bad.
Of course, daily, even hourly monitoring is important to the short-term trader
especially. Short term, or day traders move stocks several times throughout a trading
day, and will need to keep apprised of the stock in questions performance so that they
can buy at the best price or sell at the maximum profit. Day traders, for this very
reason, are very likely to make use of one or more of the stock trading software types,
so that they can remain vigilant without having to do the legwork themselves. This frees
them up so that they make trades more efficiently.
Know Your Stock’s Performance Before You Ever Buy
No matter whether it is your first or fifty-first trade, buying a new stock, or even buying
more of an established stock requires some careful consideration on your part. Have you
checked the trends for this stock? What do the leading forecasters say for this company
or those similar to it? Are the indicators pointing toward a down turn or is there the
potential for sudden profitability? If the chances are that the stock will suddenly start
moving upward, then now might be the time to buy before prices go up as well.
Knowing a stock’s performance before you buy makes perfect sense. You would never
buy a car without a test drive first, nor would you buy a house, sight unseen. Buying
stocks and other financial products can be just as life altering, so do not think that you
can buy first and ask questions later. Educate yourself on the market itself and gain
some familiarity with the terminology. After you are comfortable with talking like a
trader, you can start thinking like one as well.
If you have truly never traded on the market before, or have never dreamt that you
would be in the position to invest, then work with a broker to put together your initial
portfolio. Tell your broker what you want to see happen, your financial goals, your loss
cap, how aggressive you want to trade, and what kind of companies that you do and do
not want to invest your hard earned cash in. If you do not want to work with a certain
type of company or industry, make that fact crystal clear and do not allow yourself to
buy just “one block” of this stock or that- remember that you are ultimately in charge of
your destiny here, the broker is working as your agent and earning a living helping you
to invest.
You do not have to actually own stocks, or other investment tool to check out how the
market is doing. In fact, with the economy in such turmoil, it might be a good idea to
check out what is going on not only on Wall Street, but worldwide as well. There are
many ways to get this information, and the one you choose will depend on many factors.
If you are a traditional minded person and do not mind slightly older news, you can read
one of the hard copy trading journals or watch one of the myriad cable financial shows
for the market wrap up. If you are more modern minded, then by all means you could
log on to one of many websites that can give you up to date, or even real time,
streaming information. Most sites will tell you on their home page exactly how often
their information is updated and in many cases, it is every twenty minutes or so.
Start doing some homework, and make some initial stock choices and then track their
performance. If you cannot make sense of the charts at all, consider buying the trading
software that can help you, and then you will need to be able to decipher this
information so that you can make an informed choice. Track the progress of the stocks
that you choose for this practice trading period and see how well you have done. Did you
do a horrible job? Be glad that this was not real. Of course, if you do a really good job on
this practice, do not get the idea that you are some trading whiz and should just run out
and invest your money for real. You should still work with an investor at least until you
start making solid profits.
Once you have made your stock choices, and your broker has put in the order for your
first trades, it can be too late to make any changes. You do not want to put money into
stocks that will tank the very first day. Fortunes can be made or lost in a single trade, in
less than an hour’s time, so know before you actually begin.
Tracking your stock’s performance is important regardless of what style of trading you
intend to be involved with, or which type of investment you will be making. Do not buy
into corn futures if you have never read up on the market- if you do not know what that
implies, then it is the wrong move for you to make. Set aside your budgeted amount and
do not over invest, no matter how strongly a stock seems to be performing before you
buy in. Markets can change in a flash, and trends do not always guarantee success.
Once you know how a stock has been trading and how it is expected to perform in the
future, you can make a move, but you should still err on the side of caution. Allow
yourself a little leeway, and only invest what you can safely afford to lose. Know your
own personal limits and do not exceed them. Educate yourself; know the market, the
terminology and the stocks themselves. Investing can be risky, so do whatever it takes
to hedge your bets. Invest in financial software that will help you to make sense of the
confusing, sometimes contradictory financial charts. Watch for trends, but understand
that trends are not guarantees at all.
The Concept of Using Money to Make Money
Investing money in the stock market can be a gamble, of that fact you must be
perfectly sure. There are countless horror stories about traders that overextended
themselves with just one trade too many. But, if you know what you are doing, have a
little bit of good luck and are careful, you can make a profit in the stock market. If you
do so, what should you do with the financial rewards? Should you just pull that money
back out of the market and put it into safer, fairly secure financial products, or should
you reinvest it all right away?
If your stocks have been steadily performing well, and your profits are starting to mount
up, now might be the time to diversify your portfolio. If you have reinvest a portion of
your profits back into your established stocks, another portion into new stocks and yet
another portion into an interest bearing account you will be well on the way to building a
solid financial future for yourself. Before you consider doing this though, consult the
charts for the trends and the future forecasts of not only the stocks you have been
trading all along, but for the stocks that you are considering buying for your
diversification. And although putting money into an interest bearing account sounds
pretty straightforward, you should still shop around for the highest interest yield. Do not
assume that all certificates of deposit (CD) are giving the same rate of interest, there
can be a difference of quite a few percentage points for each.
Making a profit can allow you to move along on your own as well. Once you have made
some solid stock trades with your broker’s guidance, use a portion of your profits to
select some stocks of your own. Again, do not go over your loss cap, and use only a
portion of the earned profits to do this. If your trader is horrified or outright says no to
the trades, you might want to listen to the advice of your financial professional, but if
there is no outright overreaction, then by all means proceed. You may, of course, choose
to continue with your broker, no matter how much profit you are making.
Diversifying your portfolio is a good idea- if you are trading stocks from communication
companies, then look into stocks from another type of company altogether, or perhaps a
different type of financial tool. Do some research first, and if the market is favorable and
you seem interested in the opportunity, look into trading commodities, or perhaps gold.
(The gold market is one that is a wild ride of ups and downs and might be looking at a
huge upswing as its uses change from ornamental to more useful. Look for the gold
market to strength as further research is done using this precious metal in fuel cells.)
Siphoning off some of your profits into slightly riskier, short term trades can make you
some excellent rewards, or you could lose all that you have put into the market- but
either way, since it is profit money that you are using, you are not costing yourself
anything in terms of savings or budgeted money. Of course, there might be a more
responsible way to handle these profits, one that could net you even bigger financial
gains.
If you are in fact looking at something like commodities as your next big move, then
consider making it a long-range plan. Take the profits you make from your short term
trades and put that money into a strong interest bearing type account and leave it there,
untouched until the time is prime. While this money is growing, safe and sound in this
account, you are watching trends and patterns in the commodities market, watching for
signs of which exact crop is looking to be the next, big thing. Once the clear indicators
are there, and before the rest of the trading world catches on, you can make your move,
making sure that you have allowed the account grow enough not to incur any penalties
when you withdraw the money to trade with. Plan ahead and as always, trade within
your limits.
If trading commodities does not interest you, you might use your profits to invest in a
small block of so called “penny stocks”. These do have one set, official definition, but are
usually those that have fairly low price per share. (The SEC defines any stock with a per
share price of less than five dollars as a penny stock, for instance, but others may set
the price slightly lower or higher.) Remember, penny stocks are almost always high risk
but can equal very fast turnover profits. They can be horribly unpredictable, but if you
are fortunate enough to find one that is performing well, you can get in quick, make fast
money and then sell while the selling is good. It sounds simple, but penny stocks can be
heartbreakers, so be wary. Also, you should be aware that few financial professionals
will trade penny stocks at all, possibly because of the hard work that is required tracking
the right penny stock, the unpredictability and possibly because they may feel they are
beneath them. The advantage to penny stocks however is most obviously, the low price
per share, the ability to trade in low volume and the fact that you can get in on the
ground floor of an unproven company before it hopefully makes a big financial splash.
Finally, there is the option of moving your stock profits into the currency market. Forex,
the largest financial market in the entire world, has become a much more accessible
entity with the advent and popularity of the Internet. Once upon a time, only the very
rich and the well connected traded on the FX market, and it remained mostly a secret to
most people. In fact, most people would probably give the wrong answer if asked what
Forex was. Before making the move into the currency trading market, make sure that
you understand the basic concept of how it works, as it is much different from the other
markets for many reasons. There are no brokers, only dealers, for example. These firms
become kind of a partner to your trade and profit from successful trades that benefit
your side of the table. Again, this is a market with many technical terms so education is
vital.
Do not think that you have to, or should reinvest all of your profits back into the stock
market. You have made money, which was part of the main goal for trading in the first
place, and now you should be able to relax just a tiny bit. Use some of that money for
further trading if you intend to remain in the trading game, or use that money for
another type of investment for your future. But, whatever you do, do not get so caught
up in the thrill of the chase that you forget your limits and lose it all.
Conclusion: The Trading Market and all of its Trends
Hopefully, the repeated use of the word education in this guide has sunk in. It just
cannot be stressed strongly enough that knowing what to expect when you begin trading
is paramount to your success. Understand the terminology that the market uses. Know
what kind of trades that you are interested in making, and how they will work with your
own personality. Know your own limits and your loss cap and do not exceed it. There is
no such thing as a sure thing, especially in the stock market-no company is safe from
going belly up in a day’s time. Be wary of the broker that tries to steer you toward larger
than you can handle of stocks that you are not comfortable with, make sure that the
broker is working for you, not against you.
Understand the difference between long and short term trades and which will suit your
purposes the best. Some traders do recommend that you split between the two, which
gives you the fast moving action and profitability of short term trades with the more
stable features of the longer-term trades. Know what is meant by such terms as
commodities, futures and options before you even consider putting money into the
market with any of them.
Put your money back to work for you, once you start showing a profit. Use some of
these monies to reinvest either in your established stocks or in new ones to diversify
your portfolio. Once you have made enough of a profit to give yourself a bit of a cushion,
it is possible to start buying penny stocks to hopefully make further, quick profit.
Know how to track the progress and activity of a stock before making trade one, and
consider buying stock trading software to make this easier. Learn the difference between
a real trend and a small blip on a stock’s radar. Understand what trends can mean, and
know how to read the importance of a stock’s volume, volatility and other indicators.
Learn which is the best way for you to keep track of your stock’s performance, and how
often you will be monitoring this. Do you want daily updates no matter what, or do you
only want to be alerted if there is a huge move in either direction?
Understand that the stock market is changing every day and that trading stocks can be
very risky, as well as having the potential to be very rewarding and very interesting. Do
not allow yourself to get caught up in the go, go world and do something you are not
ready to do, nor financially capable of handling. The money that you invest in the market
can be gone in the click of a computer mouse, and the number of businesses that are
failing at this moment is frightening. Remain well under you limit and never risk anything
you could not bear to lose.
In the end, you are the person that you have to face in the mirror everyday. Do you
want to look yourself in the eye and know that you have blown your life’s savings on a
stock that failed to perform because you did not do the necessary legwork before hand?
Of course not. Look before you leap- do your research and know what the trends are for
the stock you are buying and what the indicators say for its future. It cannot be said
often enough, educate yourself, track the stocks and never risk more than you can
afford to lose.
