What are the risk in trading stocks?
Before you begin trading stocks, you should know that there are risk to it. You may lose all your money if you buy the wrong stocks. Therefore, you should trade only with the money that you are afford to lose. You should not trade stocks with the money that you need for retirement, or the money you need for your child’s college, or money for emergency.
Stock Broker
The first thing you have to do in order to trade stocks online is to open an account with an online stock broker. You can start with OptionsHouse if you like as they offer the cheapest commission with great tools. They offer a virtual trading platform where you can practice your stock picking skills without risk any money. Zecoo and TradeMonster are also good online stock brokers.
Learn how to trade stocks
Trading stock online is easy, but learning how to trade profitably takes time and effort. If you don’t know anything about stocks, I suggest you to read a few books on the stock market, technical analysis and fundamental analysis before you actually start to trade online.
Technical Analysis – is a way to forecast the stock market base on past performance. It plots stock prices on stock charts so that technical analysts can read the stock charts easily and predict weather the stock will go up or down base on the stock charts. Most technical analysts are short term traders meaning they enter and exit a stock within a short period of time. It could be a minute, a day, a few days or a few weeks. You can learn how to trade stocks using technical analysis with this ebook Swing Trading Guide.
Fundamental Analysis - is a way to predict how a company will do in the future base on its growth rate, balance sheet, financial condition, management, competitors and many other factors. They want to know if the company will grow and make more money in the future so their stock price can go up. The people who use fundamental analysis to trade stocks usually hold their stocks much longer than short term traders, it could be a few months, a year or even over 10 or 20 years. Generally, we call these people investors and people who trade short term stocks as traders.
If you want to trade stocks successfully and be able to make money in the stock market, you must learn either technical analysis or fundamental analysis or even both. There are many people who make millions using technical analysis and there are other people who make a living with fundamental analysis. You should try both and see which one works better for you.
How to trade stocks Online?
After you learn technical analysis or fundamental analysis, it is time for you to paper trade or practice your skills with a virtual stock picking account with OptionsHouse. OptionsHouse‘s virtual platform is exactly the same as their live account except that you are using fake money so you don’t take any risk. All other stock brokers offer similar platforms where you just need to enter a symbol that you want to buy, and the number of shares you want to buy and you are ready to go. Here are some common options they offer
Buy/Sell - 4 options
Buy – You want to buy a stock
Sell – You want to sell a stock
Sell Short – You want to short a stock (You need to open a margin account to short stocks)
Buy To Cover – You want to cover a stock that you short in the past
Shares: # of shares you want to buy
Symbol: The stock symbol you want to buy
Order Type: 4 options
1. Limit – You want to place an order that buy or sell your stock for a certain price or better.
2. Stop – You want to place an order that buy or sell your stock for a certain price to cut your loss in case the stock trend goes against you.
3. Stop Limit – It combines a limit and stop order.
4. Trailing Stop – This order protects your profit. You can keep trailing your stock if it goes up and sell it only when the stock drops.
How to find profitable stocks?
As you can see, the actual trading process is easy. You just set a price and you can trade in less than a minute. However, it takes time to do research and find profitable stocks to trade. There are thousands of stocks to trade from, how do you find the ones with good setups?
Fundamental Analysis Investors
If you are a long term investor who want to invest stocks base on fundamental analysis, you should constantly reading news and check out Google Finance to see if you can find any stocks that you want to buy. CNBC and Wall Street Journal are two good news resource that you can get ideas from. You can also use MarketClub to screen for stocks that you may be interested in buying for the long term.
Technical Analysis Traders
If you are short term trader like me who wants to utilize technical analysis, then you can use the following tools to find stocks to trade.
Dojispace Stock Screener – You can screen for over 7,000 stocks listed on NYSE, NASDAQ and AMEX and find stocks that match your specific technical indicators in a minute. Imagine if you were to do it manually, it would take days if not months. By the time you find the stocks, it is too late to buy.
MarketClub – This software suits for both short term traders and longer term investors. It uses a triangle technology to scan the stock market and rank each stocks on a scale of -100 to +100 with -100 being the worst and +100 being the best stocks to buy. If you feel like buying stocks, you can get the list of stocks with +100 and get a list of stocks with a score of -100 if you want to short stocks.
