online stock trading - 6 Tips for Stock Trading Beginners
The wide variety of online discount brokers makes it easy for anyone to jump into beginner trading. Trading for the first time can be an exciting and moneymaking venture, but the best way to succeed is with a pre-determined stock trading strategy based on research. Here are a few tips to help you develop a solid beginner trading strategy:
- Research online discount brokers carefully before choosing one. Online brokers tout their low commissions, but that's just one thing to consider before investing with one. Check out user interfaces to see which makes the most sense for you, and review customer-service options so you know how to get help if you have questions. Online brokers may make beginner trading easy, but they should also provide the services you need in addition to low commissions.
- Fund your new account with money you will not need in the next few years. In other words, don't bet the down payment for your future mortgage in the stock market. Similarly, if you will need your cash for a vacation in six months or a new car next year, that cash should not be risked in the stock market. Beginner trading should be done with a slush fund of cash you can afford to lose.
- Research your stock picks before placing a buy order. Beginner trading can lead you to over-hyped stocks or stocks that simply are too expensive for you to be buying as a new investor. Look for stocks that are attractively priced in your price range, meaning stocks that are priced so that you can purchase at least 100 shares of them at a time. Read up on stocks priced $10 or less and do your own research to be sure they're good buys with good prospects.
- Place your first trade carefully. To be sure you're getting the price you want in a rising market, use a limit order, which limits the top end you're willing to pay. For example, if you want to buy Ford Motor Co. for less than $11 on a day when it opens at $10.50 and seems to be headed higher, place a limit order for anything less than $11 so your order can be placed in your target range. In a market where prices are falling, don't try to time a market bottom, but instead place your buy orders based on prices you have pre-determined will work for you. Avoid the beginner trading traps of selling when others sell and buying when others buy. Make a plan and stick to it.
- Determine what your future sell prices will be. You may be thrilled to have bought Ford at $10.60 a share today, but you should know going in when you'll get out. In this case, if Ford has a long-term target price of $19, decide at what point you want to sell up to $19. It may take many months to reach that value, but the point is to monitor your holdings on a regular basis so you know when to get ready to sell. Beginner trading requires a plan for getting out as much as a plan for getting in.
- Remember that beginner trading always comes with gains and losses. Some trades will work out well and others will not. Be prepared to lose some money and learn from your stock-trading mistakes.
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