Are you attracted to the idea of being in control of your financial future, but confused about how to start investing in the stock or share market, while avoiding costly mistakes?
Or maybe you're disappointed with your performance so far?
Does it sometimes feel like every time you take the plunge and buy into the market, the price goes down?
That's understandable...
You've probably attended seminars, read other newsletters or broker reports telling you to buy this or buy that ..... you've probably heard or read a lot of confusing and sometimes conflicting information?
The real surprising facts are that very few online investors actually make money long term.
You've worked hard in your life to get your investment nest egg together so far - but now where to from here?
Maybe you want to develop some extra income or even manage your own superannuation retirement fund? For instance, from 1 July 2005, as a result of new rules on ‘choice of superannuation fund’, for the first time millions more Australian employees will be able to choose a fund for their future superannuation guarantee contributions.
Maybe you're attracted to the charts you've seen showing the power of compounding investments & have worked out the benefits to you of having a higher percentage return?
If you don't want to be saddled with a "do-nothing" portfolio that adds nothing to your bottom line or even worse, goes backwards, then please take a moment to read on.....
The reality is that only the very few achieve long term success by online trading or investing in the stock or share markets around the world. Even less for those who are online trading in the highly leveraged CFD’s, futures, options, FX & other commodities markets.
The good news is that the skills can be learned from expert investors and traders who have gone before you and can lead you across the minefield. You will still lose - and may lose regularly sometimes - but the key difference between those who win or those who lose overall is to keep the value of your total losses low compared with your profits gained.
In his definitive book ‘Trade Your way to Financial Freedom’, Dr Van Tharp calls this ‘expectancy’.
Improving your own online investing or trading performance in the stock or share market & developing your own home based business requires investors and traders to learn how to strengthen each of the three legs of your investing or trading stool, as first described by Dr Alexander Elder in his books 'Trading for a Living' & 'Come Into my Trading Room':
• Technical Analysis
• Money & Risk Management and
• Your own personal Psychology
At the very least, you need all three legs to be very strong - in order to survive, then thrive to successfully make money & outperform in the stock or share market. As Dr Elder says, the stool will not stand on just two legs.
Very experienced online traders and investors John Atkinson and Jim Berg, authors of the soon to be released Investing Online Newsletter© and the Online Trading Report©, prefer to add a fourth leg when they invest in the stock & share markets - that of fundamental analysis.
This allows them to find the most fundamentally sound and the technically strongest up trending stocks and shares to increase the odds in their favour.
As part of his overall money & risk management, John Atkinson has designed and developed his own Portfolio Management tools to plan and track individual stock selection, optimization and portfolio growth.
John Atkinson knows first hand what it means to lose enormously, both financially and emotionally in the stock or share market. He lost his Sydney Harbour waterfront home in the technology stock crash of 2000 and beyond. He was set back fifteen years financially and had to start almost over again.
John then searched the finance education world for the best investing online & online trading information to learn how to trade and invest online successfully.
With his experience learnt from the school of very hard knocks, John Atkinson now aims to help online investors and traders avoid the pitfalls that await unsuspecting novices and teach them some of the methods he’s since learnt to trade profitably and with much better risk control.
In direct contrast, John’s partner, Jim Berg is a former broker, private trader and lecturer with over 20 years experience in the investment industry. He has appeared on CNBC Asia and Market Wrap and is a regular guest speaker at the Australian Stock Exchange (ASX), Sydney Futures Exchange (SFE), Australian Technical Analysts Association (ATAA) & Traders Expos in capital cities. The first edition of his book 'The Share Traders Handbook, Fundamental & Technical Analysis Combined' has literally been a sell-out success.
Using the tools and trading strategies from his workshops and seminars, Jim Berg won the 2002 Personal Investor Magazine Trading Competition.
The first step is to protect your capital and survive in the market long enough before you can profit. Instead of giving you a fish (e.g. stock tips), Jim Berg and John Atkinson teach online stock & share investors and traders how to fish (invest) for life. With the knowledge gained, you will know where the ledge is - to be able to protect yourself initially from the pitfalls of the markets that lay ahead to trap unprepared investors.
The second step is learning how you can grow your portfolio and thrive in the stock or share market. Jim Berg’s investment strategies have achieved breakthrough results and are very different to the way the majority of investors operate.
Jim has also recently been invited to write regular articles for the ASX own newsletter.
Author Jim Berg says:
“We heard from several people who came out of investing & online trading seminars with some education but wondered what to do next? Others contacted us wondering where to begin or how to improve their current portfolio performance.
We realised many online stock and share market investors and traders are looking for on-going support to help lead them through the stock or share market minefield, dodge the pitfalls and actually profit long term. That’s why John and I decided to team up together to provide weekly guidance, with easy to follow step-by-step investment strategies for everyone who is looking to invest in any of the stock or share markets around the world today.
Our aim is to help people from all walks of life develop into the best online investor or trader that you can become and to generate the returns from your investments that you deserve.”
John Atkinson is the co-editor of the world famous 'Investing & Online Trading' stock market newsletter, featuring weekly stock trading education for novices & experienced traders & investors by high profile trader authors Jim Berg, Daryl Guppy, Dr Brett Steenbarger & Dr van Tharp.
His previous ebooks include '7 Secrets to Profitable Online Stock & Share Trading' and the 'Atkinson -Guppy Articles' - a series of articles written for Daryl Guppy's newsletter 'Tutorials in Applied Technical Analysis', previously voted no 1 trading newsletter in Australia by 'Shares' & no 4 in the world by 'Stocks and Commodities.'
Saturday, May 10, 2008
Making Money Share Trading
Australians own more shares per capita then any other nation on the planet, with more than 54% of our population owning shares.
Until recently, most share investors bought shares and let them sit in the bottom drawer. With improvements in technology and an increased awareness and responsibility for financial planning, thousands of people are becoming share traders, buying and selling shares on a regular basis. And you can see why!
Over the past couple of years, certain company share prices have risen well over a 1000%, some over 5000%! So the temptation is extremely strong to start trading shares, rather then just sitting on them, especially when most of our blue chip companies have recently fallen in value.
Well, what goes up, must come down and most of those companies that skyrocketed over the past 18 months have not only run out of steam, but have come screaming back down, producing staggering losses for investors who have held on.
Now, I'm sure I'm not telling you something you don't already know. However, it is amazing the number of people who still view the market as a free lunch, and do not practice safe trading strategies. They expect every share trade they do to provide excellent returns and then panic when their trades go against them.
Successful share traders all around the world have different trading strategies and systems, however they all agree on one basic principle, keep your losses small and let your profits run!
Throwing darts at a dart board as a share selection technique might sound a ridiculous way to choose share investments, but highlights the fact that choosing shares to buy is not as important as managing each trade once you've entered the market. Most traders enter trades based on rumours, tips and chat lines, which are really no better than using the dart board. However you choose to enter the market, be sure to adopt a strict STOP-LOSS strategy.
STOP-LOSS
A stop-loss is a predetermined point at which you will exit the trade, even if you are in a losing position. Many traders place a stop-loss 5% below the value of the shares when they purchase them. This means that they should not lose anymore than 5% (excluding slippage and volatile market movements) of the value of their share trade.
As the share price rises, ratchet up the stop-loss so that it is always 5% below the value of the shares. The 5% level is indicative only. You must determine your own level of risk for each share trade you make.
The best traders in the world know the power of a disciplined trading approach that incorporates stop-losses into every trade. For example, if you made 20 trades, and out of those 20 trades, 10 were losses, you can still make money. How can you make any money when 50% of your trades are losses? Well consider this. Let's say, as an example:
10 trades lose the maximum of 5%
3 trades make a profit of 5%
2 trades make a profit of 10%
2 trades make a profit of 15%
2 trades make a profit of 20%
1 trade makes a profit of 30%
Overall, our portfolio would rise 4.25%, as the higher returning shares cancel out the losses, leaving the balance as profit. This is the reality of trading. Accepting losses AND wins, but keeping the losses small, and letting the profits run.
The other aspect to successful share trading is excepting reasonable returns. As most share trades last between two weeks and two months, our 4-5% return is pretty good. It certainly beats bank interest rates, when considered over a yearly period. However, many novice traders try to make every trade the BIG score. In fact, one popular technique is to place all the available investment capital onto one or two different shares.
This is gambling. In this case, you're much better off at the casino, as you won't pay tax on any winnings. This is not a sensible or recommended trading approach. Successful traders spread their capital over 10-20 separate trades to minimise the risk and allow for losing trades.
Until recently, most share investors bought shares and let them sit in the bottom drawer. With improvements in technology and an increased awareness and responsibility for financial planning, thousands of people are becoming share traders, buying and selling shares on a regular basis. And you can see why!
Over the past couple of years, certain company share prices have risen well over a 1000%, some over 5000%! So the temptation is extremely strong to start trading shares, rather then just sitting on them, especially when most of our blue chip companies have recently fallen in value.
Well, what goes up, must come down and most of those companies that skyrocketed over the past 18 months have not only run out of steam, but have come screaming back down, producing staggering losses for investors who have held on.
Now, I'm sure I'm not telling you something you don't already know. However, it is amazing the number of people who still view the market as a free lunch, and do not practice safe trading strategies. They expect every share trade they do to provide excellent returns and then panic when their trades go against them.
Successful share traders all around the world have different trading strategies and systems, however they all agree on one basic principle, keep your losses small and let your profits run!
Throwing darts at a dart board as a share selection technique might sound a ridiculous way to choose share investments, but highlights the fact that choosing shares to buy is not as important as managing each trade once you've entered the market. Most traders enter trades based on rumours, tips and chat lines, which are really no better than using the dart board. However you choose to enter the market, be sure to adopt a strict STOP-LOSS strategy.
STOP-LOSS
A stop-loss is a predetermined point at which you will exit the trade, even if you are in a losing position. Many traders place a stop-loss 5% below the value of the shares when they purchase them. This means that they should not lose anymore than 5% (excluding slippage and volatile market movements) of the value of their share trade.
As the share price rises, ratchet up the stop-loss so that it is always 5% below the value of the shares. The 5% level is indicative only. You must determine your own level of risk for each share trade you make.
The best traders in the world know the power of a disciplined trading approach that incorporates stop-losses into every trade. For example, if you made 20 trades, and out of those 20 trades, 10 were losses, you can still make money. How can you make any money when 50% of your trades are losses? Well consider this. Let's say, as an example:
10 trades lose the maximum of 5%
3 trades make a profit of 5%
2 trades make a profit of 10%
2 trades make a profit of 15%
2 trades make a profit of 20%
1 trade makes a profit of 30%
Overall, our portfolio would rise 4.25%, as the higher returning shares cancel out the losses, leaving the balance as profit. This is the reality of trading. Accepting losses AND wins, but keeping the losses small, and letting the profits run.
The other aspect to successful share trading is excepting reasonable returns. As most share trades last between two weeks and two months, our 4-5% return is pretty good. It certainly beats bank interest rates, when considered over a yearly period. However, many novice traders try to make every trade the BIG score. In fact, one popular technique is to place all the available investment capital onto one or two different shares.
This is gambling. In this case, you're much better off at the casino, as you won't pay tax on any winnings. This is not a sensible or recommended trading approach. Successful traders spread their capital over 10-20 separate trades to minimise the risk and allow for losing trades.
Tuesday, March 25, 2008
Income Sources From Day Share Trading
There are still a number of expert traders out there who claim that it is impossible to make money day trading. As a person who relies on day trading for my income, this claim always surprises and saddens me. Make no mistake, day trading is no soft option. It is tough, competitive and unforgiving of mistakes. But, if day trading is your dream, it can be made to work for you.
Most successful traders find a niche which suits their temperament and which they become good at. In the process of doing this they may try different vehicles and strategies which are unsuccessful. However, because they fail in a particular area, it does not mean that it is impossible to make money in that area. All it means is that the trader was not good enough when (s)he tried it.
For example, there is not much that you could teach me about various option strategies. Theoretically, I know how to make a lot of money with options, but in practice it never worked out for me. Buying out-of-the-money options does not have enough winners for my temperament. Selling way-out-of-the-money options has plenty of winners, but really high stress levels on those few occasions when the options flirt with the strike price as the expiry date approaches. Multiple option strategies look good, but trading costs always seemed to kill my trades.
That said, I do know traders who do well with options, so obviously money can be made if you have the right strategy and temperament.
Fortunately for me, I found my niche day trading grain futures contracts, and I love it. What I like about it is that it is short and sharp, and the risk is tightly controlled. By short and sharp I mean that I only have to trade for about thirty minutes each day, but I have to really concentrate during that period to make sure that I execute my strategy with no mistakes. As for risk, I am usually in the market for a matter of minutes, a few hours at the most, and never have positions open overnight or at weekends.
This suits me perfectly. I enjoy the quick feedback from my trades, and I sleep easily at night knowing I am not in the market exposed to freak events that can be very painful when you are in a leveraged position.
Authors criticizing day trading are usually trading Forex. The day traders enemy is trading costs, and despite the commission free trading generally offered by forex brokers, trading costs are high because of the spread. If I were to try day trading forex, I would use futures contracts at the CME (Chicago Mercantile Exchange) during high volume periods.
However, I prefer markets with enough volume to ensure a tight spread, but not such a huge volume that the market becomes hard to read. The grains (soybeans, wheat and corn) fill the bill exactly for me. Equity indices (Russell 2000, S&P 500, Nasdaq eminis and the Dow $5 contract) are also good at times, but I find them more difficult. I dislike the very high volume bond market. I am not saying you can not make money there, all I am saying is that I have not succeeded!
Share traders often find a similar effect whereby very high volume shares like Microsoft are harder to day trade than a middle of the pack S&P 500 company. Usually successful share traders watch a group of stocks which they like and feel confident with.
The point is you do have to make the effort to find the best markets for the kind of trading you like to do. I think it is putting the cart before the horse to decide on a particular market before you decide on your trading style. My advice is to find the style that suits you, then find the markets that respond best to that trading style. Of course, markets are not static, so you will always be monitoring them, and be prepared to change if another market comes to the fore.
I have discussed the keys to successful day-trading in other articles, but briefly they are as follows:
* Understand how support and resistance works in the market.
* Build a trading method utilizing support and resistance levels. (The tactics you can apply near these levels are almost limitless.)
* Back-test your method on independent data (not the same data you used to design it). Ensure it has a positive Expectancy and good frequency of trading opportunity.
* Plan your money management strategy so that you know how much to invest in each trade without exposing yourself to too much risk.
* Practice, practice, practice, so that you can execute your trading plan flawlessly every time the opportunity occurs. This is harder than it sounds when day trading. Things happen fast and there are a lot of things to think about.
The trader who does these things, and has the discipline to stick to the trading plan during winning and losing spells, will be successful. As many, many authors have written, trading is 90% psychology. The main enemies are your own lack of discipline and self-honesty. Of course, the majority of day trading is done from the trading rooms of large investment banks and brokerages, and the professional traders involved are using bank funds and are not subject to the same levels of stress. You have to learn to perform as well as they do despite the additional anxiety of having your own money at risk.
Most successful traders find a niche which suits their temperament and which they become good at. In the process of doing this they may try different vehicles and strategies which are unsuccessful. However, because they fail in a particular area, it does not mean that it is impossible to make money in that area. All it means is that the trader was not good enough when (s)he tried it.
For example, there is not much that you could teach me about various option strategies. Theoretically, I know how to make a lot of money with options, but in practice it never worked out for me. Buying out-of-the-money options does not have enough winners for my temperament. Selling way-out-of-the-money options has plenty of winners, but really high stress levels on those few occasions when the options flirt with the strike price as the expiry date approaches. Multiple option strategies look good, but trading costs always seemed to kill my trades.
That said, I do know traders who do well with options, so obviously money can be made if you have the right strategy and temperament.
Fortunately for me, I found my niche day trading grain futures contracts, and I love it. What I like about it is that it is short and sharp, and the risk is tightly controlled. By short and sharp I mean that I only have to trade for about thirty minutes each day, but I have to really concentrate during that period to make sure that I execute my strategy with no mistakes. As for risk, I am usually in the market for a matter of minutes, a few hours at the most, and never have positions open overnight or at weekends.
This suits me perfectly. I enjoy the quick feedback from my trades, and I sleep easily at night knowing I am not in the market exposed to freak events that can be very painful when you are in a leveraged position.
Authors criticizing day trading are usually trading Forex. The day traders enemy is trading costs, and despite the commission free trading generally offered by forex brokers, trading costs are high because of the spread. If I were to try day trading forex, I would use futures contracts at the CME (Chicago Mercantile Exchange) during high volume periods.
However, I prefer markets with enough volume to ensure a tight spread, but not such a huge volume that the market becomes hard to read. The grains (soybeans, wheat and corn) fill the bill exactly for me. Equity indices (Russell 2000, S&P 500, Nasdaq eminis and the Dow $5 contract) are also good at times, but I find them more difficult. I dislike the very high volume bond market. I am not saying you can not make money there, all I am saying is that I have not succeeded!
Share traders often find a similar effect whereby very high volume shares like Microsoft are harder to day trade than a middle of the pack S&P 500 company. Usually successful share traders watch a group of stocks which they like and feel confident with.
The point is you do have to make the effort to find the best markets for the kind of trading you like to do. I think it is putting the cart before the horse to decide on a particular market before you decide on your trading style. My advice is to find the style that suits you, then find the markets that respond best to that trading style. Of course, markets are not static, so you will always be monitoring them, and be prepared to change if another market comes to the fore.
I have discussed the keys to successful day-trading in other articles, but briefly they are as follows:
* Understand how support and resistance works in the market.
* Build a trading method utilizing support and resistance levels. (The tactics you can apply near these levels are almost limitless.)
* Back-test your method on independent data (not the same data you used to design it). Ensure it has a positive Expectancy and good frequency of trading opportunity.
* Plan your money management strategy so that you know how much to invest in each trade without exposing yourself to too much risk.
* Practice, practice, practice, so that you can execute your trading plan flawlessly every time the opportunity occurs. This is harder than it sounds when day trading. Things happen fast and there are a lot of things to think about.
The trader who does these things, and has the discipline to stick to the trading plan during winning and losing spells, will be successful. As many, many authors have written, trading is 90% psychology. The main enemies are your own lack of discipline and self-honesty. Of course, the majority of day trading is done from the trading rooms of large investment banks and brokerages, and the professional traders involved are using bank funds and are not subject to the same levels of stress. You have to learn to perform as well as they do despite the additional anxiety of having your own money at risk.
Online Day Share Trading Schemes And Investments
Is trading through internet safe? What if someone steal my investments or, does anyone else have access to my accounts? If these are the questions that stop you from online share trading then the solutions are here. Which decade you are living in? Internet trading today is one of the largest mediums of investments and nothing can compete with it. Its security and reliability can be proved by the increasing number of users every month. More than 5,000 people are registered every month for online investments. Apart from being totally secured, easy access and speedy moves makes it more popular among day traders and other stock investors.
However, there are some questions that very often arise in minds of people like:
1. Is stock trading through Internet difficult and cumbersome?
Well, the answer is no. Just few clicks and all the information is on the monitors. Online share trading, rather, is the simplest of techniques to trade in stocks. Few clicks can get whole stock exchange to the computer screens where the greens, blues and reds differentiate the stock and hence, trading gets easier.
2. Isn't online trading costlier?
It could have been because the features and comforts it offers could be expensive. However, with the increasing competition prices to be paid are meager. Also, the technologies are rapidly improving, hence, leads to further depreciating prices. One more benefit that comes attached to online trading is the reduced paperwork and confusing formalities.
3. Present offline broker is satisfactory. What is the use of shifting to online broking firms?
Online broking firms are comparatively less expensive and better service providers. Apart from the stock exchange access, the tips and advices are quick and instant. Unlike offline trading, Internet tips are updated frequently and hence, provide better grip on the situation. Also, online traders have access to other information sources including 24-hour stock sites that provide better stock-trading knowledge to the customers.
4. How frequently are the prices updated on the websites?
Though there is no fixed standard time for updating but most of the sites are frequently updated to maintain their competitive level. To be precise, most of the sites are updated hourly, however, during emergencies or drastic changes, the sites are even updated every minute. Also, anything like major take over or company declaration, are instantly and fully covered by news.
5. How can we make sure that the prices offered by the brokerage firms satisfactory?
The answer to this problem is easy. Like any other market, there are many firms providing the same services. Hence, comparing the prices and other share trader's advices can help you make better decision regarding the choice of broking firm. Also, different sale promotion schemes and discount brokerages can be availed at the time of registration.
However, there are some questions that very often arise in minds of people like:
1. Is stock trading through Internet difficult and cumbersome?
Well, the answer is no. Just few clicks and all the information is on the monitors. Online share trading, rather, is the simplest of techniques to trade in stocks. Few clicks can get whole stock exchange to the computer screens where the greens, blues and reds differentiate the stock and hence, trading gets easier.
2. Isn't online trading costlier?
It could have been because the features and comforts it offers could be expensive. However, with the increasing competition prices to be paid are meager. Also, the technologies are rapidly improving, hence, leads to further depreciating prices. One more benefit that comes attached to online trading is the reduced paperwork and confusing formalities.
3. Present offline broker is satisfactory. What is the use of shifting to online broking firms?
Online broking firms are comparatively less expensive and better service providers. Apart from the stock exchange access, the tips and advices are quick and instant. Unlike offline trading, Internet tips are updated frequently and hence, provide better grip on the situation. Also, online traders have access to other information sources including 24-hour stock sites that provide better stock-trading knowledge to the customers.
4. How frequently are the prices updated on the websites?
Though there is no fixed standard time for updating but most of the sites are frequently updated to maintain their competitive level. To be precise, most of the sites are updated hourly, however, during emergencies or drastic changes, the sites are even updated every minute. Also, anything like major take over or company declaration, are instantly and fully covered by news.
5. How can we make sure that the prices offered by the brokerage firms satisfactory?
The answer to this problem is easy. Like any other market, there are many firms providing the same services. Hence, comparing the prices and other share trader's advices can help you make better decision regarding the choice of broking firm. Also, different sale promotion schemes and discount brokerages can be availed at the time of registration.
Thursday, February 28, 2008
Revenue Income From Day Share Trading
There are still a number of expert traders out there who claim that it is impossible to make money day trading. As a person who relies on day trading for my income, this claim always surprises and saddens me. Make no mistake, day trading is no soft option. It is tough, competitive and unforgiving of mistakes. But, if day trading is your dream, it can be made to work for you.
Most successful traders find a niche which suits their temperament and which they become good at. In the process of doing this they may try different vehicles and strategies which are unsuccessful. However, because they fail in a particular area, it does not mean that it is impossible to make money in that area. All it means is that the trader was not good enough when (s)he tried it.
For example, there is not much that you could teach me about various option strategies. Theoretically, I know how to make a lot of money with options, but in practice it never worked out for me. Buying out-of-the-money options does not have enough winners for my temperament. Selling way-out-of-the-money options has plenty of winners, but really high stress levels on those few occasions when the options flirt with the strike price as the expiry date approaches. Multiple option strategies look good, but trading costs always seemed to kill my trades.
That said, I do know traders who do well with options, so obviously money can be made if you have the right strategy and temperament.
Fortunately for me, I found my niche day trading grain futures contracts, and I love it. What I like about it is that it is short and sharp, and the risk is tightly controlled. By short and sharp I mean that I only have to trade for about thirty minutes each day, but I have to really concentrate during that period to make sure that I execute my strategy with no mistakes. As for risk, I am usually in the market for a matter of minutes, a few hours at the most, and never have positions open overnight or at weekends.
This suits me perfectly. I enjoy the quick feedback from my trades, and I sleep easily at night knowing I am not in the market exposed to freak events that can be very painful when you are in a leveraged position.
Authors criticizing day trading are usually trading Forex. The day traders enemy is trading costs, and despite the commission free trading generally offered by forex brokers, trading costs are high because of the spread. If I were to try day trading forex, I would use futures contracts at the CME (Chicago Mercantile Exchange) during high volume periods.
However, I prefer markets with enough volume to ensure a tight spread, but not such a huge volume that the market becomes hard to read. The grains (soybeans, wheat and corn) fill the bill exactly for me. Equity indices (Russell 2000, S&P 500, Nasdaq eminis and the Dow $5 contract) are also good at times, but I find them more difficult. I dislike the very high volume bond market. I am not saying you can not make money there, all I am saying is that I have not succeeded!
Share traders often find a similar effect whereby very high volume shares like Microsoft are harder to day trade than a middle of the pack S&P 500 company. Usually successful share traders watch a group of stocks which they like and feel confident with.
The point is you do have to make the effort to find the best markets for the kind of trading you like to do. I think it is putting the cart before the horse to decide on a particular market before you decide on your trading style. My advice is to find the style that suits you, then find the markets that respond best to that trading style. Of course, markets are not static, so you will always be monitoring them, and be prepared to change if another market comes to the fore.
I have discussed the keys to successful day-trading in other articles, but briefly they are as follows:
- Understand how support and resistance works in the market.
- Build a trading method utilizing support and resistance levels. (The tactics you can apply near these levels are almost limitless.)
- Back-test your method on independent data (not the same data you used to design it). Ensure it has a positive Expectancy and good frequency of trading opportunity.
- Plan your money management strategy so that you know how much to invest in each trade without exposing yourself to too much risk.
- Practice, practice, practice, so that you can execute your trading plan flawlessly every time the opportunity occurs. This is harder than it sounds when day trading. Things happen fast and there are a lot of things to think about.
The trader who does these things, and has the discipline to stick to the trading plan during winning and losing spells, will be successful. As many, many authors have written, trading is 90% psychology. The main enemies are your own lack of discipline and self-honesty. Of course, the majority of day trading is done from the trading rooms of large investment banks and brokerages, and the professional traders involved are using bank funds and are not subject to the same levels of stress. You have to learn to perform as well as they do despite the additional anxiety of having your own money at risk.
Guidelines For Investment Moves In Day Share Trading
Ever predicted the next card you would get in black jack? The answer is a definite no. On the othera hand, while investing in stocks each buys and sells move is a well-forecasted and calculated step. So how can stock trading be referred to as gambling? For those who are currently indulged in stock trading, it is quite clear that trading in shares is far different then gambling. Share trading not only lets an investor put the money at take, but also, needs time and intelligence to trade.
However, the features indicate stock market to be a well-refined business that needs sheer attention, patience, consistency nd knowledge to make profits. For those who are stepping into the world of share trading, it is important to know that day trading is just a part of the investments not the whole concept of stock investing.
In literal terms, day trading refers to the trading in stocks that involve the buying and selling of shares within a day. It is a part of short-term investments that carries high degree of risks. The risk being high notifies the fluctuations in the share prices with direct effect of economic conditions.
It has a distinct feature of short term buying and selling. All the day traders trade for small profits. The fact that makes day trading so popular is its instantaneous and low brokerage terms. Brokers generally charge low broking fees for day trading as compared to other investments. Also, the results are quite instant and a day trader can carry money at the end of the day unlike other long-term investments.
However, by being instant, it features greater risks that are to be dealt with. Hence, here are some tips that can help traders for better trade.
• Integrate the investments: staking all money in a single company is not worth. Diversification of investments must be initiated. This not only integrates the risks but also create a balanced portfolio.
• Trading in right direction: buy during bears and sell during bulls is the key mantra to be followed. To simplify, buying the shares in broken market tends to bag low priced shares. This helps in gaining more profits for any trader.
• Decide upon our sensex levels: to avoid bankruptcy it is important to decide upon the amounts of your share prices. The share market has its own moves and in no case any trader can catch its speed. Hence, create your own sensex for stock evaluation and sell them according to the market. Getting emotional and illogical and hoping to get the conditions better, always worsen the situation.
• Stop chasing the tips: stockbrokers and experts are for help and not to be copied. Though they have much knowledge about the stock market but moving on their say is not an intelligent decision. No one knows how to multiply your savings better than you. Hence, stop chasing the tips and consider them as your guidelines for your investments moves.
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