Top 100 Stock Market Tips for 2022
Trading stocks online can be a lucrative arena to enter, however, this may also come with great risks. If you are not well equipped with the artillery to get you through the online stocks jungle, then you might end up losing so much than what you have bargained for. Here are a few tips that could help prepare you for online stock trading.
Below are all very basic tips, yet very vital things that anyone who wants to engage in the online stock trading business must know. After all, investing on your own knowledge and skills in trading is the most important thing that anyone must consider in order to win in this very risky trading game.
1. Know About Stocks
Take time to know which stocks would be wise to place your investments on through extensive research or even through seeking the help of a professional. It is important that you are aware of the type of stocks that you risk your money on, after all, whatever results these may garner in the market will surely affect whether or not you will gain or lose profit.
2. Choose A Smart Trading Style That Works For You
Take time to consider what type of trading you would want to do and what style would best fit your lifestyle. For example, if you are interested in day trading, keep in mind that in order to do well in this particular field, you may need to be in front of the computer and on the telephone for very long hours in a day.
Whatever trading style you may choose, may it be day trading, short-term trading, weekly trading or even monthly trading, consider the nature of these styles and how you can fit them into your way of working.
3. Find A Good And Legitimate Broker
Another very important thing to remember in online stock trading is to find a good broker. Make sure that you take time to get to know your broker by checking whether the firm is legitimate under the SEC and if it receives good reviews from those with experience in trading.
The type of trading style that you decide to delve into should also greatly determine on which broker would be best for you. If you were engaging in day trading, then it would be best to choose a firm that has very good and accessible technological services. Other styles of trading can manage less sophisticated brokers.
4. Choose A Very Good Strategy
Because of the fact that stock trading involves so many risks, choosing a very good strategy can be very helpful for you to weather obstacles that will come your way.
Make sure that you choose a trading method that will take advantage of both up and down markets. A strategy that will work in all types of markets will surely be beneficial because you never know when demands for stocks may increase or go down, and surely, you wouldn’t want to end up losing money because you failed to foresee the different trends of the market.
Aside from this, make sure that your strategy involves minimal risks and gives you high rewards. It is always better to prevent and control risks than allow the chances that you may have to face serious dilemmas. Risk management is very vital in order to become successful in online trading.
5. Know When it Would be Best to Sell your Stocks
Also take time to know when it would be best to sell your stocks. Most people just focus on what and when they should buy stock, but often times they forget how important it is to consider when would be the right time to sell. Take in mind the signs and conditions that can give you signals on when it would be best to get out of a bad investment before you lose substantial amounts of money.
6. Analyze Market Trends
Investors can use a number of strategies to invest in the stock market. To begin with, they need to analyze market trends, learn about the market in which the companies they are interested in operate, and purchase shares at an appropriate time.
7. Market Timing
Usually, good companies announce their profits, or their status in the market, at certain times of the year. The prices of their shares tend to increase before such announcements are made. Therefore, investors need to watch out for these periods, and not purchase shares at this time. In other words, it is important to wait for the right ‘Market Timing’ for trading in shares.
8. Investment Portfolio
Make a well-planned investment portfolio that satisfies a particular level of risk tolerance Keep reviewing and updating the investment portfolio to keep up with market trends.
9. Technical Analysis
The technical analysis of stocks helps in gaining better knowledge about a company: its profits, its market capitalization, and its future growth prospects. Equally important is to be able to understand and apply the quantitative measures of the stock market.
10. Financial Advisors
Since investing in the stock market is complex, inexperienced investors should always seek help from financial advisors and stock market analysts before committing themselves and their money.
11. Buy Low and Sell High
The motto being “Buy Low and Sell High”, always buy shares when their prices are low, and sell them when the price goes up. Invest intelligently. A sharp sense of the market, along with a good knowledge of the company you plan to invest in, helps in making better investment decisions. Investors should thoroughly research the market in which the chosen company operates.
12. Long Term Vision
Long-term vision and planning is vital. Investors should evaluate their capital strength, and set their tolerance limits, before investing in a company. This means, knowing when to hold on to the shares, and when to quit.
13. Exit Strategy
It is generally advised to devise and apply an exit strategy cautiously. Investors can make their exit when they have gained good returns over a certain period.
14. Reinvesting
The returns gained from selling the shares of a company can be re-invested in some other, promising higher profits.
15. Tolerance Limit for Loss
Investors should also set their tolerance limit for the amount of loss that they are ready to bear when the market is down. They can exit when their losses approach or cross this predetermined limit. This strategy of limiting the amount of loss an investor can withstand is commonly known as “Stop Loss Limit”.
16. Buy and Change Frequently
Another strategy investors can follow is to ‘Buy and Change Frequently’. Market research shows that every company has some limit on the expected gains from their shares. Investors can therefore move out of a stock when they have achieved maximum returns from shares accordingly. It is important to invest in a variety of companies to withstand the losses of a few.
17. Diversification
The objective of any investment is to maximize returns while minimizing risks. Diversification helps in maximizing returns from investments in stocks and bonds by managing risks better. Investors ought to distribute their investments across several categories like foreign securities and mutual funds to be on the safe side, and in the process enjoy good returns.
18. Picking the Right Stock
Picking the right stock for the economic climate is not impossible, however. One way to get a handle on which stocks will perform best during a bear market is to look at the overall picture of how the stock market behaves. Usually bull markets are periods that also see a strong manufacturing sector. Houses are built, cars are manufactured, and goods like appliances and clothes fly off the shelves. The companies that make and sell those consumer products do well, and those who buy their stock to share in that success drive stock prices higher. But when the party is over and inflation kicks in, we begin to budget our money. Sales volume declines, and many factory workers find themselves out of work as consumer demand slackens. As wages stagnate, so do purchases of high priced items like cars and homes, and this helps to accelerate the decline of the stock market.
19. Recession Proof Stocks
But those who buy stocks that perform well even in this kind of economic recession – the stocks known as “recession-proof” stocks – can usually do relatively well, even during sluggish bear markets. Which stocks continue to reward shareholders in a recession? Generally speaking, those that are tied to fundamental basic necessities of life. We may not buy designer jeans and sports cars during a bear market, but we still buy heating oil and we still use electricity to light our offices and homes. So utility company stocks generally fare well during bear markets, as do companies that sell other basic commodities like gasoline. Gold and silver and other precious metals are also a good choice for a difficult stock market season, because when people are nervous about the future of the economy, they tend to invest in things of universal value, like gold. It provides a sense of security, because if all else fails to attract consumers, gold will still glitter and be considered an item of special value and significance. And if you buy gold before the bear market sets in, you can probably sell it for a profit once the demand for it increases.
20. Stable Stocks
Stocks that provide a sense of stability and security through ownership of those basic necessities of life are usually a good place to invest during a bear market. And buying stocks whose prices have fallen to bargain basement prices is also a smart strategy. Many perfectly good stocks with underlying value and strong earnings get dumped when people pull their investments away from the stock market en masse. Those who are patient can buy these at wholesale or below wholesale prices, and then watch their purchases rise in value once others realize that these stocks are good buys. When the stock market begins to climb again, those stocks that are undervalued will rise quickly and you will be left holding winners that you bought at deeply discounted prices.
21. Planned, Precise, and Well Thought Out Decisions
The only consistent notion about stocks is that they are inconsistent. Investors that make decisions based entirely on emotional “gut feelings” or make decisions based on desperation will only do about as well as they will at the casino. Planned, precise, and well thought out decisions make for strong trades.
22. Individual Risk Tolerance
All trading is based on maximizing the profits while minimizing the risks. These two factors also tend to cancel each other out. The greatest risks usually turn the greatest profits while the smallest risks typically turn tiny but long term profits. This means that an individual investor needs to find their individual risk tolerance while building their strategy.
23. Accept Losses
There will be losses. There’s no strategy in the world that can guarantee online stock trading without loss. Loss is part of the game no matter how serious the player. The most successful online stock traders in the world have one basic rule implemented into their trading strategy. They all have their stock portfolio divided into percentages. They have a predetermined percentage seeking high risk, high return stocks, a predetermined percentage seeking medium risk, medium return stocks, and a predetermined percentage seeking low risk, low return stocks. The predetermined percentages vary from investor to investor and some have the bulk of their percentages in low risk while others have the bulk in medium risk. Placing the bulk of the available funds in high risk stocks is a sign of either gambling or desperation, neither one is considered a very sound strategy.
24. Emotions
Online stock trading can become emotional, and when it does online traders start making bad decisions based on their emotions. Keeping the emotional trading to a nonexistent minimum is very difficult for many online traders, but it is also on of the best laid online stock trading strategies there is.
25. Basic Strategy
Every individual investor’s strategy will vary to suit their needs, their risk tolerance, and their individual style. However, having a basic strategy before the account is even opened is a vital key to online stock trading. Investors without a strategy tend to lose more often than they succeed. Every individual investor’s emotional strings are different, and some will need firmer, more complicated rules before setting off into the online investment world. Others will do fine with a basic outline. While learning the ropes, it is best to dabble with small sums of money rather than place large chunks of money into any stock, no matter how good it seems. One of the most significant pros to online stock trading is the investor’s ability to go through the motions on paper without ever spending a dime while they keep an eye on the stocks they believe they are interested in. Over time, online stock trading can become a very healthy form of secondary or even primary income, but the investor has to start with a plan.
26. Follow Sound Business Principles
There’s a huge myth out there that stock trading isn’t a business. Some even go as far as to call day trading no different than gambling. While this can be true in some instances, stock trading done well is just like any other business. The reverse is true as well: To be successful in stock trading, one must follow sound business principles.
27. Treat it Seriously and Professionally
Just like any other business, to succeed in stock trading, you must approach your business as a business. This is not some fly-by-night get rich scheme; this is a potential career for you to invest time, money, and education into. In other words, to succeed in stock trading, you have to treat it seriously and professionally.
28. Trading System
Just like any other business, before you invest a single dollar you should have a plan of how you plan to invest. In business, this plan is called a business plan. In investing, this is called a trading system. Without a trading system, a stock trader who trades on blind emotion really is no different than a gambler at the racetracks. Basically you need a system or amethod to adhere to. This is where most go wrong. Even the ones who realize this buy into the “emotional” methods. What do I mean by this? Methods that appeal to what we want not what we really need. Most losing methods I see do the wrong things at the wrong time. They overtrade. Take profits too fast and do not cut losees fast enough. so do the opposite.
29. Superb Management
To be successful in your stock trading business, you must have superb management. Management in stock trading involves managing yourself – Having the discipline you need to take yourself to success. It does no good to have the perfect trading system if you can’t follow the system. Oftentimes new investors shoot far past their trading limits, hoping that a stock will “come back up.” This is an example where poor management cost the investor hundreds or thousands of dollars.
30. Having a Good Computer (Basic Tool)
If the whole procedure of trading has to be done online, then it is obvious that the main foundation of this trade is the computer. If anyone wants to start with online stock trading then he should possess a fast computer with Windows XP as its operating system.
31. Having a Good Internet Connection (Basic Tool)
It is the major component of online trading as it will connect you to the various companies of the stock market. It is always suggested to go for a high speed cabloe or broadband internet connection.
It is always recommended to have an internet back up even if you possess a good net connection as there are the chances for the net to get down. You should always possess an access to a telephone line if, in any case, your system gets disrupted and you want to exit the trade then by using telephone you can inform the broker regarding the same.
32. Stock Market Broker with Low Commission
In order to enjoy the excitement of trading stock online, one has to require a broker through whom you will be involved in online trading. There are many online brokerage firms possessing different fees and offering different services. You should always opt for the online broker that proffers good stock trading and charting software. You should always select that online brokerage firm which offers market data and the updated information to all its clients. You should always search for the brokers whose commission share should be low else your profits will be spent in paying the commission to the brokers.
33. Reading Charts
Chart reading in stock trading is the most beneficial step for the traders to trade efficiently. By becoming skillful in the activity of reading charts, you can easily judge out the stocks that will move up.
34. Auto Stop Loss Orders
It should be habitual to set stop loss orders whenever you make trade else your entire account will get smashed. You should always proceed in the game by scraping down your losers early and by allowing the winner to continue. Basically, this is one of the tactics of the trade.
35. Media Personalities
You should be cautious to the media personalities rather it is recommended to work independently while trading online. This is so because there are frequent ups and downs in the stock market and by the time information of the media persons reaches you, it becomes too late. Therefore, it is always recommended that you should always work with your brain instead of trading by using someone else’s brain.
36. There is Always a Limit
There is always a limit: Every player on the stock market must not play beyond his means. The bottom line is that if you play beyond your financial capacity, and something goes wrong, you will end up with a loss of face and your family will feel the aftershocks. It’s better to control risk appetites and adventurism while playing the stock market – after all, it is a market, not a jungle that needs to be explored.
37. Never ever get Emotionally Attached to Any Stock
There is no room for emotions: Never ever get emotionally attached to any stock. Stocks are an asset class and you must look at them as such. If you don’t, and you keep holding a stock no matter what, then you will lose out on many opportunities to make money.
38. Book Profits, Stop Losses
Book profits, stop losses: Profit is like a burglar – if you don’t catch it, it will run away. Loss is like an insurance salesman – if you don’t shake it off, it will stick to you. Therefore, you must always book profits and cut losses in the stock market – all the big guns have done it and they’re human beings, just like you. So, why shouldn’t you? Get the point?
39. No One Can Time the Market
No one can time the market: You have to be God to predict the market movements, which you aren’t. So, be happy when you get in, be happy when you get out, don’t regret, don’t fret and SMILE no matter what you do, provided you do it right.
40. It Pays to Know
It pays to know: It will pay you well if you understand the stock you are buying into. What are its finances? Is it making profits or losses? Is the market price right? Is the management clean or are they sons of Enron? Does the industry have a bright future? Look, you will make a load of money if you know what you are doing in the stock market. So, get savvy with figures and with the economic and global trends. Analyze all the factors affecting a stock and then act.
41. Online Trading
The internet has opened up a world of possibilities from shopping to education to financial success delivered through a wire straight to our desktops and laptops. The internet revolution has empowered the small investor to educate themselves and to make financial gains in the arena of day trading and the internet stock exchange.
The traditional hassle of finding a broker and reaching them directly via phone or even e-mail is rapidly becoming obsolete. Online trading has advanced the average stock broker into a whole new realm. For some it’s a marvelous pandemonium that has freed them from obsolete tradition. For others, online stock trading is a scary sea of the unknown and an abyss of pitfalls.
Fortunately, with a little education and a little research the average stock trader can decide whether online stocks are the right tools for success or if they are more comfortable sticking with traditional venues. Exploring that education is vital even if you are already involved in online stock trading. There is always room for improvement and always more profitable ventures.
42. Online Stock Broker
We already know that the stock market is a volatile and unforgiving arena. Some people do very well in the stock market while others lose every penny they invest. What is the difference between these two types of investors? Some would say luck, and while luck does factor into the picture in its entirety, it is a very low percentage factor in stock investments.
Online internet trading still allows an individual investor the ability to obtain a broker and receive consultation, although most report that the brokers who rely on internet clientele are not as customer service oriented as the traditional broker whose brick and mortar office is just a few miles away. Online brokers tend to give most of their time and attention to the large accounts while the smaller accounts often fall to the wayside. That does not mean they do not provide a valuable service. It simply means that the service provided is about what you can expect of most online only services. Successful online companies have a very large clientele and can afford to lose a few who they consider to be a little too needy.
However, the online stock broker tends to have lower fees and commissions in return for their lack of availability. Traditional stock brokers have the ability to receive orders online but their commissions remain about the same as calling them on the phone and dealing with them in the traditional fashion.
Internet stock trades tend to be faster and more reliable, but beware, not all of them are instant. There are some basic options when it comes to buying or selling stocks online. Your request can either be set to a price or set to shares. Depending on the firm you are utilizing, you may not receive the same price that you noticed on the stock ticker of too much time has gone by or the stock made a sudden increase or decrease.
This not all that different from traditional stock brokers, however there is the notion that anything online is instantaneous. Most firms, whether online or tradition will explain these details when opening an account. There are a few however, that expect you to do your own research and offer very little in customer support. The simple adage to this basic issue is look before you leap.
43. Educated Stock Investor
It does not matter how good the firm is, or how good you believe the online stock program you have discovered is believed to be, nothing substitutes a solid education in managing your stock investments. The educated stock investor always has the advantage over those who place their financial future into the hands of a broker. Some believe it is too complicated to educate themselves, that the facts, figures, trends, and charts are beyond the average person’s ability to understand. This is not true. Investing is something that few people have explained to them in a way that is simple, basic, and easily understandable.
Math, Science, and English are basics of our education as children. Stock market investing is left as this looming adult topic that exceeds our knowledge base. The truth is that the basic key elements of stock trading are really quite simple and there are resources out there to help us understand the wealth of information we tend to find intimidating.
44. Stock Market News Briefs, Media Tickers, and Hot Tips
Making sense of the stock market news briefs, media tickers, and hot tips takes more than just the basic eye for low figures and basic gains. Again, that is where the educated investor can develop a strong plan and a concrete investing strategy that can help him surf through the more volatile days of the stock market.
45. Exercise Caution
Even the best of internet stock traders can lose money in the online stock market. It is always best to exercise caution when beginning your trading career. Whether you are just looking to make a little extra money for retirement, college tuition, or are looking to earn a living from internet stock trades, there is an element of risk involved. Stock trading is the equivalent of highly educated gambling. Anything can happen and there are simply no guarantees.
46. Realistic Expectations
Even with the volatile markets and the risks involved, success is till possible. The best way to approach the online stock trading arena is to develop a strategic plan based in realistic expectations and grounded in the basics. Be selective, especially in the beginning. Just because a stock looks good at the onset doesn’t mean you need to go throwing all of your assets into it. Many stocks look good at first glance. Being selective means approaching your investments with a bit of skepticism and realism.
47. Listen to Those who are Already Successful
One of the best ways to be successful is to listen to those who are already successful. Again, one of the best resources for all in one place information is the remarkably informative website online trading ideas. With quick tips and in depth advice and intelligent commentary, this web site has something for everyone, and every investor comfort level.
48. Trading Psychology
Trading psychology tells us that when a trader loses he begins to become somewhat of a perfectionist in his dealing. Many traders think that in trading, a good day will always be one that is profitable. Trading psychology experts tells us this is not true. A trader should define a good day as one where they have extensively researched and planned with discipline and focus, and have followed through to the entire extent of the plan. Yes, when a trader has mastered the art of accepting losses and working through them with a well thought out plan then good days will become profitable in time.
49. Concentrate on What You Can Control
Because the art of trading in an unpredictable market fluctuates so greatly from one day to the next, experts in trading psychology believe that it is important that you concentrate on what you can control, instead of things that are beyond your control. Looking into the short-term you cannot expect to be able to control the profits of your trading. With that said, look at what you do you have ability to control.
50. Have the Ability to Control the Difference Between Good and Bad Days
You do have the ability to control the difference between good and bad days. You are able to control this factor by extensively researching the strategies you implement within your trading experiences. By learning to research your chosen strategies, thus controlling the amount of good and bad trading days you experience, you will, in the long-term begin to generate profits, which is the ultimate goal of every trader.
51. Become Realistic in Trading Instead of Becoming a Perfectionist
Trading psychology experts tell us that it is important to become realistic in trading instead of becoming a perfectionist. Perfectionist traders, relate a loss with failure, and will become obsessed with the failure, focusing only upon it. Realistic traders understand the unpredictability of the market and taking a loss is simply part of the art. The main key you must remember in trading psychology to be able to effectively limit your losses, instead of becoming obsessed with them. A common thing seen within the trading psychology world is that traders who are obsessed with their losses often have a hard time bouncing back from them, thus losing in the end.
52. Strategies to Stop Losses
Experts in trading psychology have organized three basic strategies you can use to effectively stop losses. These strategies are:
Experts in trading psychology have organized three basic strategies you can use to effectively stop losses. These strategies are:
• Price Based
• Time Based
• Indicator Based
Stops that are priced based are generally used when the other two have not functioned. To make this work you will need to make hypothesis’s about the trade and identify a low point in that particular market. Then you will set your trade entries near your points, thus making sure that losses will not be overly excessive if the hypothesis fails.
Time Based stops constitutes making use of your time. Designate a holding period you allow to capture a certain number of points. If you have no achieved your desired profit within that time limit, you should stop the trade. If effectively used you should stop even if the price stop limit has not been achieved.
The Indicator based stop makes use of market indicators. As a trader, you should be aware of these indicators and utilize them extensively within your trading experiences. Look at indicators such as, volume, advances, declines, and new highs and lows.
53. Newsletters, Reports on the Internet
Stocks are never too low to sell or never too high to buy, but once you complete the first transaction, stay clear of a second one until the first one shows signs of profit. You will want to sell what shows a loss and keep the stocks that provide you a profit. After all, you are investing to increase your financial status, not to give your savings away. When looking for help with the stock market, you can find it in many places such as: newsletters, reports on the Internet and, of course, through the many brokers out in the market today.
54. Researching a Company and Buying a Book
As an investor, you will want to research the company you plan to purchase stock in. The key to success is knowing what you are getting into and the history of that particular stock will help you to make wise decisions. After doing your research, it may also be a good decision to purchase a good investment book or something with the basic marketing strategies with stock tips. You can find good books for sale in local bookstores or on the Internet. You can also check with local brokers, as well, to see if they offer handouts with useful information on how the stock market works.
55. Knowledge is Key
Your personal finances are not something to play around with. You do not want to risk losing money on a spur of the moment investment: knowledge is key. The more knowledgeable you become where your money is concerned, the more profitable your stocks will be. Your broker will be happy to help educate you on the ins and outs of the marketing world with the ever-changing stock market. If you are not sure which broker to go with, you can surf the Internet and check out brokers, as most of the firms have websites with a fountain of information offered to their clients.
Tips for Choosing a Stock Broker
Many types of brokerage services are available. Significant cost differences appear when you factor in all the fees and commissions. Estimate how many trades you expect to make in a year, and all ancillary services you will use. Then you’ll be prepared to make an informed decision.
Most of the buying and selling on the stock market is handled by stock brokers on behalf of their clients, who are the investors. Many different types of brokerage services are available.
56. Full-Service Brokers
“Full-service brokers” offer a variety of ways to help clients meet their investment goals. These brokers can give advice about which stocks to buy and sell, and often have large research departments that analyze market trends and predict stock movements, for their clients.
Such services are not free, of course. Full-service brokers charge the highest commission rates in the industry. Your decision whether to use a full-service broker will depend on your level of self-confidence, your knowledge of the stock market, and the number of trades you make regularly.
57. Discount Brokers
Investors who wish to save on commission fees generally use discount brokers. Brokers in this category charge much lower commissions, but they don’t offer advice or analysis. Investors who prefer to make their own trading decisions, and those who trade often rely on discount brokers for their transactions.
58. Online Brokers
Taking the discount concept 1 step further, online brokers are the least expensive way to trade stocks. Both full-service and discount brokers usually offer discounts for orders placed online. Some brokers operate exclusively online, and they offer the best rates of all.
59. Account Requirements
Whichever type of broker you choose, your first order of business will be to open an account. Minimum balance requirements vary among brokers, but it is usually between $500 and $1000. If you’re shopping for a broker, read the fine print about all the fees involved. You’ll find that some brokers charge an annual maintenance fee while others charge fees whenever your account balance falls below a minimum.
60. Cash Or Margin?
Brokerage accounts come in 2 basic types. The “cash account” offers no credit; when you buy, you pay the full stock price. With a “margin account,” on the other hand, you can buy stock on margin, meaning the brokerage will carry some of the cost. The amount of margin varies from broker to broker, but the margin must be covered by the value of the client’s portfolio.
Any time a portfolio falls below a specified value, the investor will have to add funds or sell some stock. A greater opportunity exists for realizing gains (and losses) with margin accounts, because they allow investors to buy more stock with less cash. Involving greater risk than cash accounts, as they do, margin accounts are not recommended for inexperienced traders.
61. Selecting The Right Broker For You
You should carefully consider your needs as an investor before making the choice of a broker. Do you wish to receive advice about which stocks to buy? Are you uncomfortable making trades on the Internet? If so, you will be best served by a full-service broker. If you are comfortable buying on the Internet, and you have the knowledge and confidence to make your own trading decisions, then you will be better off with an online discount broker.
62. Perks
Information, it seems, does not come cheap however, as brokers will typically charge high commission rates for every transaction. Whether or not you decide to use a full-service broker depends on your level of self-confidence, your knowledge of the stock market and the number of trades you regularly make.
63. Accounts
No matter what type of broker you choose, you must first open an account. Each broker sets their own requirements for maintaining an account balance but it is usually between $500 and $1000. When choosing a broker look at the fine print and find out about the fees involved. Some brokers charge an annual maintenance fee while other charge fees whenever your account balance falls below the minimum.
64. Comparison Shopping
After deciding which type of broker you want, do some comparison-shopping between competitors. Significant cost differences can show up when you factor in all the annual fees and brokerage rates. Estimate how many trades you expect to make in a year, how much cash you can deposit into your account, whether you want to use margin accounts, and which services you need. Armed with this information, you’ll be prepared to compare your actual costs for various brokers, and to make an educated choice.
Tips About Day Trading
Learn how to trade stocks using Technical Analysis. Learn how to see where the ‘herd’ is going and how to capitalize on that knowledge.
No doubt you’ve heard of ‘day traders’ and how they sit at home making big money without having any boss or customers or have any need to interact with anybody. So how do they do it? Well they use a number of techniques but in this article we’re going to explore one (and probably the most used), ‘Technical Analysis’.
Before we start clarification must be made that the author is not a financial consultant and this article is not intended to direct or advise you in your investment strategies. This article is merely to describe some of the author’s observations whether real or imagined.
People, especially concerning publicly available information, tend to respond at least to some degree as they percieve others to respond. For example: if people continue to buy stock until it reaches a certain price and then stop (for whatever reason) once, when the stock turns around (after the dive) and goes back up, people will be more wary of keeping the stock after it goes over that price again. This is known as a ‘resistance’ line. Of course resistance lines are broken all the time but patterns do seem to exist within stock pricing histories.
The job of a technical analyist is to be able to spot situations where the odds are in there favor that a particular stock will go up or down. Technical analysts watch for certain patterns and buy and sell stock based on predictions made as a result of spotting those patterns. Of course no one can acurately predict what stock prices will do 100% of the time but day traders generally try to keep the odds in their favor and that’s how they make money.
If you have reason (even just a little) to believe that a particular stock is going to go up you might buy some. You recognize that it might go down a bit first so you determine how far to let it drop before you sell. If within that margin it turns and goes up you can ride it all the way up to the point where you expect it to start to fall (a resistance line). If you keep doing this (lose a little or gain a lot) over and over and you make money just 50% of the time, you’ll profit from your overall investments. The trick is to be consistent. Get out every time it drops too far and never ride it above where you expect it to turn or you might get caught in an inverted spike and lose a whole lot real fast.
65. Shorting ( To “short” a Stock)
To ‘short’ a stock is to ‘sell’ it at a specific price (not having bought it) and then ‘buy it back’ after it drops below that price. Brokers let you do this and you don’t actually end up with the stock in the end. Basically you ‘sort of’ buy stock expecting it to go down instead of up.
66. Head & Shoulders
The stock goes up and comes back down. It goes back up but farther (maybe 1/3 to 1/2 higher) and drops back to the same line. It goes back up again but the the same point as the first time and drops again. This pattern looks vaguely like a head and shoulders. When the price drops below the ‘neckline’ it is expected to continue to drop. The investor would short the stock in this case. This pattern is also seen frequently in an inverted pattern. In that case a long (buy the stock) would be indicated.
67. Cup & Handle
The stock goes down and then back up to form a pattern that vaguely looks like a cup. Then it goes back down just a little and back up to form what vaguely looks like the cup’s handle (around 50% of the cup bottom). Now there are 2 points on a line where the stock reached and then went back down and it’s right back at the top of the cup. The time of execution is when the stock reaches that point for the 3rd time. The stock is expected to shoot up to the next higher resistance point (above the cup’s top).
68. Triangle or Wedge
The stock goes up and back down then back up then back down where the top and/or bottom price lessen consistently so that the distance between the top and bottom is less each time. If you drew a line by connecting the points of the top price and then another line connecting the points of the bottom price you would draw a triangle. When the price ‘breaks out’ of the triangle it is expected to continue in the direction that it’s going. Very similar patterns to this are called the Flag and the Pennant.
69. Double Top
The stock goes up then back down to a point and then back up. When it hits the price that it turned at the last time it turns again. The pattern looks like an M but all the lines are diagonal. If it breaks below the point at which it bottomed out (in the middle of the M) it is expected to continue down. A short is indicated. An inverted version of this pattern (a W) would indicate a long (buy).
70. Understand the Risk
As with all financial investments, day trading is risky – in fact, it’s one of the riskiest forms of trading out there. The stock prices rise or fall according to the behaviour of the market, which is entirely unpredictable. Day traders buy and sell shares rapidly in the hopes of gaining profits within the minutes and seconds they own those particular stocks. Simple to do in theory, harder to do in practice.
71. Amount of Capital
If you are constrained by a small amount of capital, you may not be able to buy large amounts of a stock, but buying only a small amount can add to the risk of a loss. And, obviously, it is impossible to predict with certainty which stocks will result in profits and which in losses. Even the best of traders must learn to accept both outcomes.
72. Number of Shares should be the Focus
It’s also important to know that in day trading, it is the number of shares rather than the value of shares that should be the focus. If you day trade, you WILL face losses, but even for the more expensive stocks, the loss should be marginal, because prices do not usually fluctuate to an extreme degree over the course of just one day.
The day trading industry deals in a large variety of stocks and shares. Here are just a few:
73. Growth-Buying Shares
Shares made from profit, which continue to grow in value. Eventually, these shares will begin to decline in price, and an experienced trader can usually predict the future of this type of share.
74. Small Caps
Shares of companies which are on the rise and show no signs of stopping. Although these shares are generally cheap, they are a very risky investment for day traders. You’d be safer to go with large caps and/or mid-caps, which are much more secure and stable thanks to a premium.
75. Unloved Stocks
Company stock that has not performed well in the past. Traders buy these shares in the hopes of generating profits if and when the stock rises in value. As with small caps, unloved stocks can be a risky choice for day traders.
76. Invest Some Time in Research, Have a Solid Strategy and Disciplines Trading Plan
These examples are NOT your only options when it comes to day trading stocks. The best way to determine which type of stock is right for you is to invest some time for careful research, a knowledge of market patterns, a solid strategy, and a disciplined trading plan.
77. Be Prepared
The key to successful day trading is to be prepared. Know as much as possible about the industry before you begin actually trading. You need to learn to trade ONLY when the market gives the right signals, and ONLY when the volume of activity in the market supports a successful opportunity.
78. Trade With Money That You Can Manage To Lose
Stock trading can be quite a gamble. Your chances of earning can just about equal to your chances of losing, and in some cases, there are even greater risks of losing more. Money that you will need for survival should never be used in trades.
Because most trading markets can be very unpredictable, make sure that you make use of money that you can afford to lose. It may be too risky to invest money that you will badly need for your daily living or for your future. Always take note of the risks involved and what you are particularly risking in the exchange.
79. Always Trade In Reasonable Sizes
Some markets in the exchange are able to allow individuals to trade very large amounts of leverage. And so, a lot of people trade in large quantities in order to assure larger profits. However, doing this may also open up the possibility of losing money in such large quantities as well.
It is always wiser to scale your trades in order to lessen risks. Never trade sizes that can wipe you out of all your money. And you would have nothing to lose if you actually start small, and grow your transactions from there.
80. Identify Market States Before Trading
It is also very vital that you are aware of how the market is doing before you start trading. Take time to find out if trends are going up or down. If the you know whether the market trends are weak or strong then it may become easier for you to make the right decisions in your transactions.
By getting a good picture of the situations in the market, you can easily lay down a plan for conducting a successful trade. Things would become easier for you to foresee what must be done when you have a good idea on what may happen. In this way, you may prevent making a lot of wrong choices.
81. Set A Time Frame For Trading
Even if the main goal of trading in the market is to merely make a lot of money, planning beforehand when you would like to get out of the game can save you from a lot of risks.
The trading industry is consistently moving, and through the transition of time, prices may evolve. Because of this, there can also be a growing exit price. Although it may be impossible to absolutely determine when you would exactly quit the market, it could be helpful if you at least place your trade in perspective and find out when you would best collect the exit price. Doing this contributes to liquidity in the movements of the market.
82. Formulate a Good and Strong Strategy to Weather Whatever Obstacles May Come
Anyone who will lead you to believe that it is easy and it is always a sure thing to make money in stock trading is being untruthful. Remember that this particular market, by nature, is a volatile and consistently moving industry. And so, you must be aware of the different trends as well as formulate a good and strong strategy to weather whatever obstacles may come.
83. Consider Both Technical and Fundamental
In order to make a successful trade, you must take into account the technical as well as fundamental factors in order to make good and informed decisions. Make sure that you use your knowledge and skills in determining a strategic plan to go about your trades. Achieving success in this industry is not as easy as it may seem, but with a little hard work, you may just get great results.
Tips for Buying Penny Stocks
Investing in penny stocks provides traders with the opportunity to dramatically increase their profits, however, it also provides an equal opportunity to lose your trading capital quickly. These tips will help you lower the risk of one of the riskiest investment vehicles.
84. Penny Stocks are a penny for a reason
While we all dream about investing in the next Microsoft or the next Home Depot, the truth is, the odds of you finding that once in a decade success story are slim. These companies are either starting out and purchased a shell company because it was cheaper than an IPO, or they simply do not have a business plan compelling enough to justify investment banker’s money for an IPO. This doesn’t make them a bad investment, but it should make you be realistic about the kind of company that you are investing in.
85. Trading Volumes
Look for a consistent high volume of shares being traded. Looking at the average volume can be misleading. If ABC trades 1 million shares today, and doesn’t trade for the rest of the week, the daily average will appear to be 200 000 shares. In order to get in and out at an acceptable rate of return, you need consistent volume. Also look at the number of trades per day. Is it 1 insider selling or buying? Liquidity should be the first thing to look at. If there is no volume, you will end up holding “dead money”, where the only way of selling shares is to dump at the bid, which will put more selling pressure, resulting in an even lower sell price.
86. Does the company know how to make a profit?
While its not unusual to see a start up company run at a loss, its important to look at why they are losing money. Is it manageable? Will they have to seek further financing (resulting in dilution of your shares) or will they have to seek a joint partnership that favors the other company?
If your company knows how to make a profit, the company can use that money to grow their business, which increases shareholder value. You have to do some research to find these companies, but when you do, you lower the risk of a loss of your capital, and increase the odds of a much higher return.
87. Have an entry and exit plan – and stick to it.
Penny stocks are volatile. They will quickly move up, and move down just as quickly. Remember, if you buy a stock at $0.10 and sell it at $0.12, that represents a 20% return on your investment. A 2 cent decline leaves you with a 20% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 20% loss is a $2000 loss. Do this 5 times and you’re out of money. Keep your stops close. If you get stopped out, move on to the next opportunity. The market is telling you something, and whether you want to admit it or not, its usually best to listen.
If your plan was to sell at $0.12 and it jumps to $0.13, either take the 30% gain, or better still, place your stop at $0.12. Lock in your profits while not capping the upside potential.
88. How did you find out about the stock?
Most people find out about penny stocks through a mailing list. There are many excellent penny stock newsletters, however, there are just as many who are pumping and dumping. They, along with insiders, will load up on shares, then begin to pump the company to unsuspecting newsletter subscribers. These subscribers buy while insiders are selling. Guess who wins here.
Not all newsletters are bad. Having worked in the industry for the last 8 years, I have seen my share of unscrupulous companies and promoters. Some are paid in shares, sometimes in restricted shares (an agreement whereby the shares cannot be sold for a predetermined period of time), others in cash.
How to spot the good companies from the bad? Simply subscribe, and track the investments. Was there a legitimate opportunity to make money? Do they have a track record of providing subscribers with great opportunities? You’ll start to notice quickly if you have subscribed to a good newsletter or not.
89. Not to Invest More than 20%
not to invest more than 20% of your overall portfolio in penny stocks. You are investing to make money and preserve capital to fight another battle. If you put too much of your capital at risk, you increase the odds of losing your capital. If that 20% grows, you’ll have more than enough money to make a healthy rate of return. Penny stocks are risky to begin with, why put your money more at risk?
Tips about Stock Options
Stock options are the most well-known form of long-term compensation motivations for executives in leading companies. Because of this, stock options are currently being provided to a lot of employees in many companies. Here are some things you need to know about stock options.
90. Stock Options are Appropriate For:
Stock options are appropriate for small companies where growth is anticipated, and publicly-owned companies that want to provide company ownership to its employees.
91. Stock options are Still Popular
This is according to the National Center for Employee Ownership who reported that there are 9 million employees who participate in approximately 4,000 plans. This is in comparison to the 1 million participants a decade ago.
92. More and More Companies are Offering Stock Options
More and more companies are offering stock options to rank and file employees in addition to the executive suite. In the current environment where top talents matter a lot, offering stock options have become an effective way of luring efficient employees.
93. When implementing stock options, consider the following:
• How much stock a company will be willing to sell
• Who will receive the options
• The number of options available to be sold in the future
• If it is a permanent part of the benefit plan or merely an incentive
94. Employee stock options have 2 Basic Types
They are called the nonqualified stock options and qualified, or incentive, stock options, or the ISOs. The nonqualified stock options are usually offered to employees, while the ISOs, which are eligible for special tax treatment, go mainly to the upper management.
95. Stock options can be Exercised in 3 Different Ways
Paying cash, swapping employer stock that you already own, or borrowing money from a stockbroker while at the same time selling the necessary shares to cover the costs you incur.
96. Stock options need to be Exercised Prudently
Otherwise, these can cause financial troubles, especially when you’re paying taxes on your profits. It’s true that you still have to pay taxes even though you decide to keep the stock you bought. The trick is not to overreach to enjoy the benefits that stock options offer.
97. Even though the ISOs are for the privileged, it doesn’t mean that nonqualified plans are regular plans
Fact is, nonqualified stock options, unlike ISOs, can be offered at a discount to the stock’s market value. The nonqualified options are also transferable to children and charity, but with the employer’s permission.
98. Maximize Profits
You can maximize your profits by holding on to your stock options until they are about to expire. This allows for appreciation for your stock options and therefore, higher gains.
99. Exercise your Stock Options Earlier
However, there may be times when you need to exercise your stock options earlier. You may do so if you are overweight on your company stock and you want diversification to ensure safety in your investments.
100. Advanced Option Strategies
Advanced option strategies open much more possibilities. You can hedge your open positions or earn an extra income for instance. You can also make money while the stock isn’t moving at all.
