Online Stock Trading

Online stock trading is a lot of fun…when you make money. Here are a few online stock trading tips and some guidelines for how to make successful trades.

Mind Your Profit and Loss
While it may seem obvious that you should take into consideration your profits and losses, there is much more to a loss or a gain than the numbers themselves. With each trade you should be sure to set two orders: a stop loss order, and a take profit order.

The stop loss is usually placed in tandem with a stock order, and is set below the current buy price for long positions and above the current price for short positions. Should the market go opposite the direction you forecast, the stop loss will be triggered and your trade automatically closed at a loss. This is a very important order; one that will literally save your account should the market move against your position quickly.

The second order, a take profit, is placed at the same time as the first order. The take profit is set above the current price for long positions, and below the current price for short positions. Essentially, when the price of a stock reaches your take profit, the trade is closed and you receive your investment back plus any profits. The idea is that by setting a take profit, you take the emotions out of your investment strategy, since once the trade is set it will eventually hit either your take profit point, or your stop loss point, necessitating no further action on your part.

Mind the Clock
While it may seem wise to pile into a company at the very last few minutes of the electronic trading day, it may not be the best idea for your trading account. Since the stock markets have a regular trading session and then a short electronic clearing section, a number of new traders attempt to buy and sell their regular positions in the aftermarket, only to pay the price.

The electronic hours are generally very low volume, and many brokers do not execute automatic trades on their client’s behalf during this time. Thus, any buy order is sure to be met with very little ask offers, and it is possible to pay several pennies, or even a quarter over the current share price in such low volume conditions. Buy when there is a market…you shouldn’t have to make one!

Mind the Calendar
An economic calendar is a must-have, or must-read for any serious investor. An economic calendar, available online through most brokerage companies or for free on a number of trading-related websites, highlights all economic releases and market shaking news in the next few days, weeks, or months. These calendars often show the earnings release calendars as well, allowing investors to take earnings into consideration before buying and selling stock.

Realize that while your company may have very little to do with a particular sector, the news that comes from that sector may very well hurt the daily value of your investments. It is not at all uncommon for a restaurant group to lose value on the same day as a poor release of housing data. Likewise, it isn’t uncommon, either, for all kinds of industries to gain value when a very important and commonly-held company releases good earnings. So, if you’re ready to exit a stock, be sure to consult with the various types of economic data in the future, regardless of whether or not they directly affect your company.

Trade Cheap
It is well-documented that the number one reason investors fail to beat the market is the fees assessed on individual trading accounts and funds. Always be on the lookout for a better deal, as it is one of the best ways to add thousands of dollars of value into your portfolio without accepting additional risk.

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