This is the first of a series that will wade into the world of online stock trading, using automated charting and scanning to get an edge.
There is no rent… No business expenses like advertising, or any of the normally associated costs of setting up shop that will need to be counted.
The cost of the tools to trade stocks compared to the start up cost of pretty well any other type of business is so low that comparison is literally something that can’t be measured fairly.
Inventory will be time sensitive stocks that are bought low and sold high.
Trading stocks online is much like a home business with very low overhead if you approach it with common sense.
You can make money as in additional income to a paying job, or supplement your retirement by trading on line; you could even do it full time, all through an online brokerage house TD Waterhouse is one of the better online brokers to use..
Among others… this is where you will get real time stock quotes to make purchases. They also provide real time stock chart analysis software along with stock analysis software tools.
The software from a broker you are most concerned getting access to is level II, which is a depth market tool that shows the real time bidding and selling blocks of a stock. It is a tool that will give insight to market movement.
This software is provided for a fee of course and is a feature that has benefits in that they offer low trading commissions in return which are quite competitive. When all is considered… the cost as an investment for tooling up is really quite cheap to get an edge. Armed with these tools you may get a sense of being professional, but beware… those tools can’t factor in human emotion (especially when your own money is on the line). You also need a timeline of experience that provides the missing element to be able to effectively use the tools. Mix in a whole market of people that are just as emotional, and you have a recipe for disaster. You can buy a hammer and still not build a house, yet bruise your thumb quite effectively.
However, hooking up and creating an account is not in the scope of this article as the purpose is to highlight the best approach for a beginner/intermediate who is going to get, or already has an account. If trading stocks on line is in the future for you, then you need to speak to an online broker to set up an account if you haven’t already…
In the meantime, exploring the buying and selling stocks can be an alluring prospect mimicking a work at home business that has the potential to be exciting and profitable. How to do it though, has a learning curve that may put you out of the court before you learn the ropes. The following considerations need to be examined.
First and foremost, is to avoid entering the fray using many of the Stock picking services which offer Hot Tips and Promote super gains over days. You must learn to think for yourself.
Very few people following a selected stock picking service can purchase at the required time to take advantage of the spectacular price gains as the stock has been swelling with insiders who are selling to the late comers, usually you, and by the time you actually own some shares, the price is about as good as it gets within a few points. This is where holding the bag takes on a personal meaning as the price drops below your purchase point. This is not how to buy low and sell for profit. When you are losing money, thinking converts to emotion where greed and fear rule… Sentiment is something you want to be on the right side of… It’s called sentiment trend trading.
In order to trade on the right side of a trend, there is a learning curve that needs to be nurtured on the side lines for a time, practicing the emotional style that will be personal and unique to you. Dry runs are important. It will all make sense as you pick the winners in a dry run… When you have some skin in the game though, it is totally different than doing your test runs, and the emotion is a factor that is the difference between buying low and selling high.
The method and tools will be universal with many that will confuse and mystify. Some are free and some cost money. There are only a few sites that offer quality advice and education.
When you first make the move into trading on line you will no doubt pursue a self learning process that will take you through your own journey of trial and error You will try looking over many different web sites for insight to success that will cost you many hours of research eliminating and recognizing the sites that are legitimate in order to do due diligence. If there was a way to filter that process, it would certainly be a time saver. A portal perhaps that chronicles the efforts to stay profitable.
You need to avoid day trading as this is truly reserved for people who are professional traders, who are in the pits, which is something you will not have available to you. For most day trading is a suicidal pipe dream. This is not what you really want to hear, I know… easy money is not realistic and your approach must be professional.
In order to successfully trade on line there are some simple just make sense rules that if applied will take you down the path to profit.
To sum up your approach you will need to develop a discipline in the following concepts.
You need fundamental analysis, but you also need to know what the practical function of fundamental analysis provides.
Fundamental research in the chosen stock will require a realistic analysis, called at best speculative fundamental analysis that in todays market experience will only allow a fundamental approach the opportunity to avoid bankruptcy in the chosen stock, thereby protecting you from losing money that cant be recovered. Instead, the worst case scenario you will have to face is hopefully dead money that potentially has the ability to recover if you make a bad call and hang in there.
Without fundamental analysis done to a high standard… Your choice of stocks will be decidedly inferior.
There are few sites that offer the skill set considerations that provide for sound speculative analysis that fill this requirement. It would be good to know the sites that have a good insight to that type of analysis.
But, you need more.
Charting analysis is the study of price movement motivated by emotion and is best used on strong stocks.
Charting technical analysis is a skill that is required to be learned, and is pointed at realistically speculative fundamental analyzed stocks that fit into what is considered realistic market price motivators that need to be navigated. Market Motivators change trend. Most of the hard fundamental analysis crunched numbers have no effect in causing a price to move; they merely keep the pond full, stepping aside for Market Motivators to make trending waves.
Trade the trend.
In a Positive Broad Market… charting can take on a mystical crystal ball voodoo charting experience. In a positive strong rallying broad market… charting will provide a strong insight to picking strong appreciating stocks.
Pointing charting analysis willy nilly, or at stocks that are only being swollen with hype is a dangerous money losing practice. If charting analysis is to be effective, it is also best used with a strategy that compliments the prevailing trend. The amount of trades should be few. Trade in a strong market trend with the applicable strategy.
Trend is elusive, but with practice there are methods of recognizing trend that can be applied.
You need to learn to recognize trend to make a purchase, or sell accordingly to stay on the winning side of a holding position for the duration of the trend until it changes direction, or, reverses moving against you. This is timing, which is a subject of huge controversy, but for those who can it is a skill that compliments Speculative Fundamental Analysis.
The truth is that the time it takes to do the fundamental analysis and looking for chartable stocks to consider can be so time consuming as to be almost impossible unless you employ Automated Charting Analysis that can be focused on the right stocks. This gives you the time to do due diligence.
If your still interested, there are web sites that can offer a portal into online trading that will be take you through a learning curve, offering many free services that can compliment some rather inexpensive paid services. This site explores some of those sites. There are more. The good part is that most of the services listed have the quality of being free, or relatively low priced for the high quality content and truly insightful charting and research they have… providing free time to focus on the Due Diligence information that really has a chance at being the relevant information required to be successful.
Automated Charting and Portfolio Management is worth looking into, if you are serious about online trading. This is the first of a series that will wade into the world of online stock trading, using automated charting and scanning to get an edge.