Stock Market Trading

Stock Market Trading Tips

Trading stocks can be extremely rewarding if done correctly. Many people who get involved in stock market trading are just normal everyday people. This has been made possible by advances in technology. It is now easy to make your own stock picks and execute the order to buy or sell through an online broker. There are many books which one can learn from in order to trade effectively in the stock market today. Understanding how to read stock charts and perform technical analysis will greatly improve your stock picking skills. With thousands of companies listed on the stock market, making the right choices can be very challenging.

Make sure that your broker is competent and is able to carry out your trades in a timely manner. This is important in order to get you the best price for your stock. The broker will either route your trade through to an ECN, or may be using his or her own. Depending on what kind of broker you use, full service or discount, you may not get any stock tips or advice. It is crucial that you then familiarize yourself with the different kinds of stock orders and what they mean.

The simplest and quickest of these is the “market order”. If you give your broker a market order for a stock, he will buy or sell it immediately at whatever its current price is. If you give a “Limit order”, your broker will buy or sell the stock at a specific price only. If the price specified cannot be obtained, then the stock will not be bought or sold.

Another stock order that is used in stock market trading is the “stop order”, which will automatically sell or buy a stock when it hits a specific price. This can be useful if a stock starts to decline and you want to limit your losses. It is important to note that when the system reaches the stop order price, it will place a market order to sell the stock immediately. This means you will get whatever the current going price is, and there may be slight variance between the stop price and actual price.

Other things to learn before getting involved with stock market trading would be chart analysis; this will help you in better predicting where a stock’s price may change direction. The most effective charts would use candlestick patterns, which provide an excellent visual representation of how the stock is trending. Candlestick charts are also easy to read and interpret.

Stock Market Tips – The Good, The Bad and The Ugly

Do Stock Market tips work?

In 1994 I made a windfall profit of over $7,000 from index options. I was barely out of investing ‘nappies’ then, but in my euphoria I thought I was the next Warren Buffet in the making. In those days, I was hot on Stock Market tips. After what was for me an unprecedented profit, I believed that whatever I touched would turn to gold. Don’t laugh!

I was on a roll, and quickly bought options in a company that I had every reason to believe was heading for the stratosphere. I invested most of my $7,000 profits. Two weeks later I closed the trade at a big loss. Luckily, I had learned the value of stop losses; otherwise my loss would have been much worse.

What really upset me wasn’t so much the money that as lost as the manner in which I went about losing it. The one and only reason I made the investment was because I heard a news report about the company’s recent success and how the company’s share price was bound to go higher. That was the only thing I needed to hear, and off I was like a dog at the races.

I learned the hard way that Stock Market recommendations do not work. I think they are bad, and dangerous to ones financial health. If I had my way, giving or receiving tips would be classed as a federal offense. Yes.

Is there a good side to Investment tips though? Yes, but only if you use them as a starting point to do your own analysis.

If my very good friend who is a Fund Manager phones me tomorrow and tells me to buy shares in General Motors (GM) because they are unbelievably undervalued, I would say, “thank you very much”. When I get home, I will do my own research. If my research confirms the tip my friend gave me, I would then proceed to happily invest in General Motors. That is the good side of Stock Market tips.

Unfortunately though the limited benefit of tips is by far outweighed by their ugly side.

Many a time, especially on Internet forums, Investment tips are used to defraud the unsuspecting public. This usually happens with penny shares in what are popularly known as ‘pump and dump’ operations.

Typically con artists would buy a significant stake of a penny share, and then under the guise of offering Stock Market tips, they promote (pump) it heavily on bulletin boards and other forums. They do this to whip up a buying frenzy, and then quickly sell (dump) all their shares to their victims who scramble to get in on the act.

The con artists smile all the way to the bank with huge profits, and start the process all over again with another penny share and a different set of innocent victims.

Do not let yourself be one of their victims.

Stock Market Investment Tips For New Investors

Thinking of making a killing in the stock market? Sure, you can make a fortune by investing in stocks, but bear in mind that you also undertake the risks that come with all investments. Here are some useful and practical investment tips if you are just starting out.

Tip 1: Do your due diligence. Due diligence is a phrase that is often used by investors. It means doing proper research. In other words, do not plunge into any risky investments before doing your homework. Read up about the stocks and take the time to understand the businesses that you are going to invest in. That will help minimize your risks.

Tip 2: Don’t just listen to news and rumors. It’s important to know what you are doing so that you won’t be wavered by groundless rumors. There are always news and rumors flying all over the place. If you are easily swayed, you may make a rash investment decision and that may cost you a fortune. This is also related to the first tip. If you can understand the businesses well, you know what to believe, and what not to believe. Trusting your gut alone is not enough. You must also be smart about your investment decisions.

Tip 3: Avoid speculative investments. Usually, new investors make the mistake of making risky speculative investments. They are out to make a quick buck and don’t have the patience to conduct proper research. In such cases, they are at risks of losing huge sums of money should the stocks take a bad turn.

Tip 4: Spread the risks. Don’t put all your eggs in one basket, especially if you know the stock you are investing in can be quite risky. It’s true that some stocks with higher risks may return higher profits. But what if the stock plummets? If your investment is spread out over a wide variety of stocks, you won’t be so badly affected.

Tip 5: Think of both short, mid and long term investments. Don’t just think of making quick money. Place some money in long term investments as well to spread out the risks. Wise investors usually invest only in businesses with sound fundamentals. They invest because they see real value in a Company’s products and services.

Tip 6: Don’t be blinded by greed. Avoid being emotional about investment decisions. If you find that you can’t think with a cool head, put off the investment. There will always be other opportunities arising at a later date.

Tip 7: Know when to cut loss. Sometimes, cutting loss may be your best decision. Don’t hold on to a stock that you know is going nowhere. Know when to cut loss when you invest in a stock. That way, you won’t be caught holding on to a stock when it hits rock bottom.