HOW TO TRADE STOCKS FOR BEGINNERS

Updated: 11/08/2008 19:40
Reprints/Permissions  Hyip Monitor
9o you want a career with no boss, no fixed work time, no office and no fixed work place Do you want your career to be engaging, dynamic

Do you want a career with no boss, no fixed work time, no office and no fixed work place? Do you want your career to be engaging, dynamic, and exciting? Do you want it to offer high profits in exchange to little work?

That's what buying stock online can give you. For most traders it doesn't even feel like work - it's more like fun.

But stock trading can also be extremely risky, frightening, desperating and hopeless. You can see your rivers of wealth, built for years, shrinking down to nothing in just few days. Stock trading is extremely risky and not always profitable.

If you want to stay on the positive side, you'd better learn more about buying stocks in this beginners guide.

Day Trading And Stock Investing
Before you go into buying stocks you need to decide what your trading style is going to be. There are hundreds of strategies and tactics but in general everything falls into two main categories - buying stocks for long term profits (i.e. stocks investing) or day trading stocks. In this beginners guide to investing in stocks I won't go into too much details, but let me just outline the main differences:

Day trading stocks means to trade actively every day and try to extract profits from the every minute changes of the stock prices. This means you can buy and sell different stocks several times per day. The day trader usually doesn't care about the value of the stocks as long as he can predict a price change in the next minutes or next hour.

The stock investor is less aggressive. He doesn't need to trade many times per day and many days he doesn't trade at all. The focus of the stock investor is on stocks which supposingly have long term value. The long term stock investor is not worried if a stock lose a percentage of its price for a day or even few months. What he knows is that the good stocks will cost 2-3 times more 5 or 10 years later.

Of course you can combine day trading and stock investing, but it's good to know your goals and know what kind of profits you are looking for.

How To Pick Stocks
Picking what stock to buy depends on your choice - whether you are looking for short term gains or long term profits. The day traders pick stocks based mostly on two main factors:

* Technical analysis. It's a way to forecast the market prices based on the history data. You can read more about technical analysis on Wikipedia. It's important to know that technical analysis takes a good effort to learn and does not guarantee profits.

* Hot news. A more reliable way to decide what stock to buy is the current news. If you learn about problems in some company it almost guarantees that the price is going to fall. Publishing good news on the other hand, raises the price.

In day trading the real long term valuable and competitive power of the companies don't have much weight, because traders are closing their open positions in short time.

On the other hand the long term stock investor cares mostly about how sustainable the company pillars are and how perspective its industry is. Of course stock investors can also gain advantage by using technical analysis but they rely a lot more on the fundamental factors. If you want to buy stocks long term, look for companies that are innovative, growing and producing real value for the people. Avoid dying industries and companies whose success is based on manipulation, monopoly or too aggressive marketing.

How Much Money To Invest In Stocks
It's a common question for a beginner stock investor to ask how much of his overall money should go into stocks. There is no hard rule, but it's highly recommended that you don't keep more than 20%-30% of your portfolio in a single investment instrument. Therefore it's recommended that you don't put more than 30% of all your net worth into your stocks portfolio.

If you want to be a day trader I would recommend to stick to no more than 20%. Don't get disappointed by this - don't forget that your home and any other liquid assets you own are part of your net worth, so 20% is not that small.

If you are focusing your investment for long term results you can eventually increase your stocks portfolio to 40% but no more.

Finally, never forget the golden rule: DO NOT buy stocks with money that are intented for food, rent or medical expenses. Trading stocks is a risky business and it's even riskier when you are a beginner.

Where To Trade Stocks Online?
There are thousands of companies which offer stock trading online. Unfortunately some of them may be fraudulend so you must be very careful when depositing your money. I recommend you to pick a large, reputable and well known company rather than trying to save few bucks but exposing yourself to risks with some unknown one.

If you find some not so well known company which offers good rates, make sure to search the net for reviews and customers feedback. Search for combimations like "company name + review" or "company url + scam" where of course you should replace "company name" and "company url" with the name and the URL of the company you are planning to use.

One of the most reputable companies that offer online stock trading platforms is GCI Trading, but I encourage you to research the Web for more.

If you are not in the USA, UK or Canada and want to trade your country stocks, check the best local companies that give platforms for stock trading on your national stock exchange.


About the author

Brett Sherpan has been working for seven years writing and editing for online and print media. He has held various editing and copywriting positions and can quickly and competently write copy for sales, marketing and editorial content. Brett is a consistently dependable team player, who thrives in a high-pressure environment, enjoying the challenges of meeting deadlines and am comfortable researching, writing and editing on a wide range of topics
You May Also Like