There are many aspects to trading. Most traders who work for companies are primarily concerned with investing other people’s money. Big trading houses invest billions every year and in the process they make money for their investors as well as for themselves. Mutual funds that invest in the stock market is by far one of the safest ways to invest in stocks but it will most certainly not make you rich. In fact, it won’t even make you7 enough to support yourself unless you invest large lump sums of capital.

If you want to start trading for a living then you need to look into short term trading. While you can buy and hold in the stock market the idea of buying and selling stocks over short time frames means that you can reap consistent profits. Instead of taking an annual margin you will take smaller margins but take them more often. The two main areas that you need to look into is day trading and swing trading.

Day Trading
When you day trade you trade on daily or even hourly fluctuations in the stock market. You will hold unto a stock for no more than a day or two before you sell. It again. The idea is that you exploit small changes in stock prices over a daily cycle. The goal is not to make huge profits but instead to take much smaller profits but to take them more frequently. As you build your capital you can start increasing your profits by trading larger amounts of money at a time. You will need a Level II trading platform to allow you to buy and sell in real timesince time is a crucial component of your success.

Forex trading can fall into this category as well. Its a slightly different field and something that comes with a lot of fluctuation. It requires a significant amount of patience and persistence to master forex trading but it can be highly lucrative and allow you to trade well when other markets are down.

Swing Trading
Also called momentum trading is different from day trading in that you hold on to a stock for anything from a few days to a few weeks. These longer time frames means that you have more scope for exploiting market trends and it also gives you a bit more flexibility for holding on to stocks. The idea is that you don’t tie your trading capital up for too long and you trade with momentum by letting your money move all the time.

Although its far less stressful than day trading it still means that you are at the mercy of short term fluctuations in the market. If you can become an adept technical trader then you can do very well as a swing trader. There’s a lot of good information, courses and advice at hand and its probably the best place o start if you want to be trading for a living.

The practicalities of trading is quite simple. You can start with as little as $1000 although I recommend you start with more than that. You will make a lot of mistakes at first but you should see that as being part of your education.

The real challenges when trading for a living is the mental and emotional side of it. While you don’t have many of the stresses from a day job, the kind of stress you have as a trader is much different and often much worse. You are at the mercy of the markets to a large extent and unless you are someone who can manage their emotions very well you will have a very tense time. I suggest you start by trading in your free time without quitting your job. Having that income from a job can provide you with the safety net and help you learn much faster and achieve success much quicker. Once you are comfortable with making consistent returns then you can quit your job and trade for a living…and enjoy the good life!
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So, what is day trading all about? In very simple terms you will buy a stock and hold on to it for anything from a few hours to a day or two and then sell it again. You take a short term position on everything you trade and unlike investors you are not too concerned about long term fluctuations. Its about looking at the stock market with a magnifying glass and looking at micro changes.

All stocks move up and down all the time. If you look at any stock over a 1 year period you will see fluctuations – some great, some insignificant. If you take that same stock and look at it over a 3 month period you will see fluctuations and when you zoom in even more to a daily level or even an hourly level you will also see fluctuations in price. As a day trader, its these fluctuations that you are interested in.

Day trading is all about taking small margins, but taking them often. While a long term trader would be interested in seeing a 10% return per year on a large amount of money, you’d be more interested in taking 2 to 10% on smaller amounts but taking them daily – sometimes multiple times per day.

The nature of the markets is that during any given day there are fluctuations in price for any stock. You want to “exploit” that buying low and selling high (or vice versa with short selling). The difference between the opening price and the closing price of any stock is usually significant if you look at it on a day by day basis. This is what a day trader will do. To a long term trader, the day to day variations are relatively insignificant since they are waiting for significant changes in a stock price. These are the kind of changes you want to avoid as a day trader.

So, the basics of day trading is that you want to trade small fluctuations in stock prices and make up many smaller traders and take smaller profits daily. This is a very basic take on it because with the right strategies you can increase your success as well as increase your profits. There are a couple of things that you need to take into account as well.

Firstly, you will need a Level 2 trading platform which is a software package that will allow you to get direct access to stock prices. It will also allow you to quickly buy and sell – which leads to the next issue which is your online broker. Online brokers charge a per-trade fee. If you pay $5/trade and you only make a $10 profit then its hardly worth the effort. Keep this in mind when choosing your broker. Many will cut the fee when you make a large amount of trades every month. Some will give you their software for free. Keep this in mind when choosing your broker and know that its a really important piece of the puzzle.

Secondly, you will need an education. Even if you have some knowledge of trading. Day trading is a very different ball game. Its fast and you will have to learn to make good decisions intuitively. This can take time so you will need to be patient and know that there is an important learning curve. Getting a good day trading course can be a very good start. Also, if you can attend seminars or work with someone to mentor you then it can help you a lot.

Most day traders use Candlestick charts as its one of the most accurate and most effective way to day trade. You need to learn Candlesticks to the point where it becomes second nature to you.

These day trading basics covers only some broad ideas. Its important that you keep it simple when you start since actually starting and doing it is the most important step. Do not rush into it blindly but know that actual first hand experience is imperative. Day trading is no “get rich quick” but if you stick with it you can learn a vital skill, the skill of making money at will.
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This is very normal though. Online trading and the stock market can be very intimidating to a novice. Even experienced investors can find trading online intimidating. In many ways, doing it online removes a lot of the intimidation but it also opens up opportunities to anyone to invest in the greatest investment vehicle ever invented by mankind.

Let me talk briefly about online stock trading, how it works and how to get started.

Trading is the simple process of buying and selling shares on a public exchange. The two most well known exchanges are the New York Stock Exchange and the NASDAQ. There are thousands of companies that offer shares on these exchanges and you can buy shares in virtually any and every major company in the USA. Every developed country in the world has its own exchange and shares can be traded from virtually anywhere thanks to the internet.

In the past (the days before the internet), trading was quite complex. In order to buy shares you had to get a broker. The broker will act as the middleman between you and the exchange and because he was licensed he could buy and sell shares on your behalf. It was a slow and cumbersome process and was quite expensive.

Fast forward to the internet era and thanks to online brokers you can get direct access to the exchanges from the comfort of your own home. These online brokers are virtual and are only websites that connect you directly to the exchanges. You can buy shares and have the trade executes instantaneously. Thanks to this, the concept of day trading became very popular and today its one of the preferred trading strategies for many who trade from home.

So, what do you need to start trading online? Here are a few important starting ideas for beginners:

1. Education:
Without a doubt the most important ingredient for success is to get educated. There’s a lot of “jargon” and ideas that is very foreign to those who are not familiar with trading and investing. There are also a lot of concepts to learn and learning different trading strategies is essential to your success. Apart from reading books you could try and enroll in a weekend seminar or take night classes. There are also some great online courses with the added benefit of joining trading communities on the internet.

2. Capital and a Trading Account
It goes without saying that you will need capital to trade. However, even if you don’t have the capital yet it does not prevent you from getting an education. For many its actually a good place to start – getting the education before you have the money to trade.

So, how much do you need? As an absolute minimum you will need $1000. That;s what;s needed to open a trading account. The trading account is effectively your broker account and you have several choices. eTrade, Ameritrade and ScotTrade are the biggest and most trusted. You need this account to be able to make trades. You will be charged for every trade you make (usually around $5 to $10) plus additional fees that vary quite a lot.

Once you have a trading account and you know what to do then you are all set and you can start trading. Its really as simple as that? Unfortunately its not! There is both an art and a science to trading and the only way to learn it and master it is by actually doing it. The second secret to online stock trading for beginners is to keep it as simple as possible. The important thing is to get your feet wet and to start doing it. Through experience you will learn a lot and as you start doing more of it you will get better and better.
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Day trading can loosely be defined as buying and selling stocks in a very short time frame. To really understand day trading, lets consider the alternative – buy and hold. Most investors will buy stock and hold on to it for anything from a few months to 20 years. What this long term position gives you is the luxury of time. Over a long time frame, the stock can fluctuate a lot but because we have time on our side we can “wait it out” and sell at the right time.

One of the big downsides of this strategy is that our capital is tied up. Although you can see slow returns, it can be a great investment because over time stocks can grow immensely. This is ideal for people who want a long term wealth strategy and who are following a long terms investment plan.

For day traders this is not the case.

Day traders will typically buy and sell a stock within a few hours. The basic principle is that you take smaller profits but you take more of them. Your capital is constantly moving and constantly working for you. By taking a short term view we really have to zoom into the markets and look at how a stock fluctuates during a given day. By taking small and consistent profits it can quickly add up and if you manage your risk well it can be a very lucrative “career”.

The principles of trading remain pretty much the same regardless of the time frame you trade in. However, for long term positions it really pays off to look at the fundamentals of a company. Because you plan to hold on to the stock you really need to make sure that you are investing in something that has long term potential and sound financial basics.

For a day trader this will just not make sense.

Day trading is all about acting and reacting quickly. By seizing opportunities quickly you can profit from the smallest fluctuations in the market. It therefore makes sense for a day trader to be very proficient in technical analysis. Learning to read candle stick charts is essential and learning to spot break out patterns is vital to your success.

Day trading for beginners is all about learning to deal with the emotional roller-coaster as much as it is about learning about the technical aspects of buy and selling. The shorter the time frame you trade in, the better your timing has to be. Because we are relying on smaller fluctuations in the market it means that we need to capitalize on the fluctuations in a 24 to 48 hour period.

One of the great advantages of day trading is that you can start with a relatively small investment. Because we are moving our money around a lot it means that we don’t tie up large sums of money for extended periods of time. It’s totally possible to start day trading with $5000 capital. However, there is a steep learning curve and one that can only be learned through first-hand experience.

Here are some great tips on day trading for beginners:

1. Don’t quit your day job (yet):
It can be tough to try and learn day trading if you still have a day job and if your work hours don’t allow it then it can be near impossible. Get some trading experience first and take a slightly longer market position as a swing trader where you hold your position for 2 to 3 days.

2. Get Educated:
Its vital that you get a trading education. Whether you take night classes or whether you teach yourself through books, make sure that you don’t start without having the basics down. There are some fantastic online courses that allow you to work at your own pace. Many online courses have forums where you can interact with other traders which is priceless in getting tips and getting your questions answered. If you can afford it, try and attend trading seminars and workshops as these will immerse you for an extended period of time.

You need to become very proficient in technical analysis and even if you use sophisticated software, you need to know technical indicators very well. This takes a bit of learning and a lot of practice.

3. Technicalities:
As elementary as it may sound, make sure you have a fast and reliable internet connection. You will also need a Level 2 trading platform which is basically a piece of software that can connect you to the markets “live” and allow you to get up to the second market information and allow you to buy and sell immediately.

What helps a lot for day trading for beginners is to find a method or a system that you can follow. There are many trading strategies for all forms of trading. For day trading its essential that you learn a strategy – even if its just to start with. Over time you can learn and develop your own.
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Strategies are important. Whether its in sport, in business or in the world of day trading. We a need a strategy because it gives us a method and structure that guides our decisions and our actions towards a specific goal. You can think of a strategy as a set of rules and these rules will help you make decisions.

What makes day trading strategies all the more important is the fact that we need to make decisions very quickly and if you allow your mind to run its usual decision making process then you will probably always react out of fear – and make the wrong decisions.

Trading strategies are not complicated – although they can be. For day trading I suggest you keep is stupid simple. The more complex is gets the more likely you are to get caught up in the process and not the outcome – which is what really matters. Many highly successful day traders use basic chart patterns.

Chart patterns are a great way to trade because it gives you a visual guide. Whether you are looking at channeling patterns or head and shoulder patterns, they are relatively easy to identify. It’s a classic way to do day trading because it allows you to “ride the wave” and capitalize on the 50 to 70% movement of stocks in either an upward or downward direction.

Another thing I love about simple chart patterns is the fact that you can often profit multiple times from the same stock. You can buy and sell when its in an uptrend and then short sell it when its a in a down trend. More stable stocks tend to have very predictable patterns and allows you to trade them all day long and shaving of small and consistent profits all day long.

More complex day trading strategies include trading with Candlestick chart which has its own unique set of rules and indicators that can be very effective for day trading. It allows you to see very specific buy and sell signals that you cannot see with normal line charts.

If line charts are more your thing and you want to get a bit more sophisticated then you can look into trading strategies like Moving Average Cross-overs. This is a very popular strategy and basically overlays 2 moving averages. The way these two moving averages interact will then give you buy or sell signals and it can be very effective but its definitely a more advanced strategy.
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So, how do you find the best stock to buy? I remember when I first started trading it was one of the most difficult things to do. Where do you find stocks and then how to you find the really good ones?

In theory ANY stock can be a good investment. Any start up company “could” be the next Apple or Microsoft or Google – but that’s not the issue. This is where most novice investors fail miserably. They look at companies and fail to look at investments. When you look at investments you set all your preconceptions aside and you start looking at a stock purely from a scientific point of view. Its it 100% reliable? No, off course not but the goal is not the be right 100% of the time. No trader is.

So, what do you look for? There are essentially 2 schools of analysis when it comes to valuing any particular stock. Technical traders look at charts to make decisions while fundamental traders look at the fundamentals of a company which includes their earnings and financial statements. Technical traders tend to be short term investors while fundamental traders tend to be in it for the long term. Although this is just a rule of thumb its important that you realize that you need to look at both if you want to be a more sophisticated investor.

How To Find Good Stocks To Buy

Opportunity is everywhere and even in the worse economy you can find good stocks to buy. I like to find “ideas” by reading financial websites like…

• Yahoo Finance
• The Motley Fool
• The Financial Times

When they talk about specific companies or sectors it can give you ideas for what to look for. When you start your search you can start finding specific stocks to look at in more detail.

You need to look at a lot of stocks before you invest in any particular one. You need to analyze it as closely as possible to help you make the most informed decision possible. Using technical analysis you can identify trends and by looking at the fundamentals you can identify good businesses to invest in.

Its important that you have a system by which you evaluate stocks. A system will allow you to work within set parameters and set rules that will help you identify when to buy and when to sell a stock. Working with a proven trading system will allow you to work with a proven formula which is really important when you first start trading. Blindly buying and selling stocks a recipe for disaster. Find a good system and let the formula guide you. All expert traders have great systems that allows them to find great opportunities in any market.
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There are those that argue in favor of stock picking software. When it comes to trading we are often our own worse enemy and over-analyzing a stock or failing to see certain aspects can make this kind of software extremely useful and in this sense even more accurate.

Opponents of stock trading software will argue that by removing the human factor you remove the “common sense” and an experienced trader’s ability to assess value. Can a computer really think like a human being can? Can trading software go on a “gut feeling”?

The argument is most certainly valid both ways but the fact that trading software has become extremely sophisticated is undeniable. In my opinion you would be dumb to ignore the advances in software to help you as a tool for trading – especially if you are a day trader or a less experienced trader.

The key to make stock picking software “work” is to only use it as a tool. You should never remove your “common sense” or experience from the equation. If you can combine the two you will have a much higher chance of succeeding. The truth is that 90% of novice traders lose all their capital within the first 3 months. Using a tool like this can only help you make more informed decisions.

In the end, trading is all about picking stocks. Its as simple as that. Pick the wrong stock at the right time and you fail. Pick the right stock at the wrong time and you fail. Getting it right is not easy, but at least the right stock picking software can help you and give you some guidance.

Does it work? Well, it still depends on you! You have to make it work. Online trading is a very dynamic process and s the software get more sophisticated we have new challenges to deal with. However, there’s no denying that you have to need to get the experience and learn the ropes. The more you know, the more stock picking software will help you.
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Online trading software can be split into 3 main categories.

1. Analysis Software
The majority of trading software are aimed at being an analysis tool. Technical trading can be very complicated and with the right software you can simplify it to a great extent. Analysis software can help you see patterns and analyze a stock in great detail. The level of complexity and price varies greatly and many software packages has quite a steep learning curve.

If you only need a basic technical tool to see basic trends and prices then all the free websites is probably sufficient. If you use more complicated trading patterns then you can benefit greatly from the right analysis tools.

2. Trading Platforms
This can vary from the complexity of trading platforms that professional traders use to something as simple as the live trading platform that your online broker provides you. Basically this type of online trading software enables you to buy and sell shares online. Your trading account is linked up to the software and it allows you to place buy and sell orders.

Depending on the complexity of your software you are able to do a whole host of things and having Level 2 access will enable you to see live stock data as it happens. Most online brokers provide some sort of software free of charge and many will give their high end users Level 2 access without any additional charges. Trading platforms can be very powerful, but some have a steep learning curve.

3. Stock “Prediction” Software
The subject of much discussion is the so-called trading robots which is basically a software program that picks stocks. By analyzing stocks data, the software uses traditional stock picking criteria to automatically analyze and “pick” stocks – and in theory it is much more accurate than a any person can do manually.

While a person can only look at a limited number of data, the software can analyze an immense amount of data and therefore make better “decisions” – that is in theory at least!

There 3 categories of online trading software is not as clear cut in reality though since most software aim to do more. You will find that many trading platforms have a lot of powerful analysis tools while a lot of analysis software have a lot of automated “prediction” tool. It’s important to not get bogged down with software and to always remember that it is just a tool in your trading tool box. In the end YOU make the decisions.
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Learning day trading is not a quick process. It takes experience to make good trading decisions and regardless of how smart you are, you will have to go through the learning curve. Be warned: those who try and take short cuts, burn their fingers. Here are some of my best advice to get you off to a flying start.

1. Learn from the best
There are a lot of mediocre traders pretending to be the best. If you want to be successful with online trading you need to sniff out the very best day traders and learn from them. There are numerous books and DVD courses available. Personally I learned a lot from Bonni Turner, Chuck Mellon and A.J Monty. They all have very good books and for a mere $15 you can get all their wisdom.

2. Seminars
Learning has to become your passion. Only by learning more and making those small little distinctions can you become a good day trader. Attending seminars and learning first hand in that environment is priceless. Once you get involved in the world of online trading you will be surprised how many top traders have seminars where you can go and learn first hand from a pro.

3. Mentors and Masterminds
Trying to figure things out on your own and struggling alone in your home study is NOT the way to learn day trading. In fact, this is a recipe for disaster. Find a mentor or at least find a mastermind group where you can interact and learn from others. Not only will you learn a lot, but it will keep you motivated and save you a lot of trail and error.

4. Persist
Learning day trading is akin to learning a new language. It is often frustrating as hell and losing trade after trade can quickly become discouraging. Never give up. Just see it as part of your education. Most importantly, you have to learn from each and every mistake.

5. Become a Smart Investor
The sooner you start seeing day trading as a serious “job” the faster you will learn. Don’t just dabble in it. Go for it all out or don’t go at all. Although I am a big supporter of using software and stock pickers, you still need to learn the WHY. Don’t just rely on the software to do it for you. Sophisticated investors can think on their feet and they have taken the time and effort to learn the why and the inner workings of each trade.
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But you should always keep in mind that even great things always have something which could stain them. Trading online is no different from this. There are things you need to watch out for and be prepared for to protect you and your family’s hard earned money, or else it might all go down the drain.

Due to the online nature of this type of trading, there is little to no personal involvement. When you go to an online brokerage and buy or sell stocks, all you’re relying on is you. You do not get any market advice from a hired broker, nor do you get to establish any rapport with the online broker. You just simply tell them what you’re buying or selling, and that’s it. Compared to hired brokers who charge you commission, online brokers get a fixed salary, so they might not be as thrilled to land you good deals as hired brokers are, since they will be getting the same pay check still. To remedy this, keep yourself updated on the latest market information.

As going online has eliminated personal involvement, it has also drastically increased the amount of information readily available in your fingertips. There are so many stock market watch websites and market information websites that you could turn to for the latest news and updates. From there, after a little analysis and studying, you could decide for yourself which ones are the best. It’s all about turning the negative into a positive – though you would have less personal interaction, that doesn’t necessarily mean that you’re all alone. In fact, there are so many others who could help you – and you could make the decision on your own, without pressure from brokers who could just want to make their commission.

Next is the threat that the online brokerage company you’re visiting could just uproot itself and run, taking you and everyone else’s money. Now that is a serious threat, and with the number of scams getting more attention from the general public, the fear for this sort of thing is well-based. Investing thousands of dollars on an online brokerage website only to see it disappear would hurt you, to say the least. To prepare for this, all you have to do is read up. Do some research on which websites are best for this. Information is abundant, and it will well-serve you if you take the time to read and learn.

Trading stocks online has its dangers – but so does doing so the regular way. If you ask me, trading online has the edge over other types of trading because the dangers that it has, compared to others, are very minimal. Don’t get afraid, just prepare for it well and nothing will go wrong.
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