Tips for Trading In the Stock Market

The stock market is an important aspect of the global economy. Without an efficient stock exchange that can help people easily and quickly trade in assets, the economy would gradually grind to a halt. If there was no market place where companies could trade their securities in exchange for cash, capital would become sluggish.

As a result, financing new ventures, in spite of being promising, could be heavily curtailed. The main reason traders and investors trade in the stock market is to maximize profits. To achieve high profits, the following are some of the tips to consider, including:

· Study the market

Information is power. Therefore, it is important to be well informed about the market, at any given time, because changing trends are a common phenomenon.

It is equally important to know who you are before choosing a stock. If you are a beginner and you seek to make good returns by investing in stocks, it is advisable to gather information and assimilate the same.

Learn the motions of the market and the best time to sell or buy stocks. The right information can help you transform it into an attractive venture.

· Prepare your mind

To become a successful investor, you need to change your perception from being risk averse to being a risk taker. You need to develop a clear mindset that will be ready to face the risks head-on and be willing to accept the winnings and losses.

You must be ready to learn and re-strategize, time and time again, in light of the unpredictable nature of the stock market. Ultimately, you will be able to reap higher returns for taking high risks.

· Lay the ground rules

It is important to know yourself in order to help you define your rules in trading in the stock market. The broad categories of players in the stock market are the investors, speculators and traders- each of them playing by different rules.

Investors often buy into a business as opposed to the stocks, while speculators buy or sell stocks depending on the their perception of the stock prices, either going up or down, without a working knowledge of the company.

Traders, on the other hand, try to capitalize on the short-term fluctuations in the market to reap big profits. As long as you are disciplined you will be able to abide by the rules, avoiding shortcuts. This will help you build an unshakable and strong capital base.

Pros and Cons of Trading in the Forex Exchange Market

One of the first decisions a trader makes concerns the type of market to enter. Options, mutual funds, futures and stocks are great choices, but they often need large trading accounts. This may be difficult to arrange, at least when first starting out, for the new traders. A good candidate for the new trader includes the forex or foreign exchange market.

Here are some of the key points related to forex trading pros and cons:

Pros

High leverage - A significant appeal for many traders entering the forex market is the choice of high leverage. A trade margin in forex can equal 50:1, which is a great improvement on the options in the stock market at a 2:1 margin. A large trading position is possible with forex trading even with a relatively small account, but this high leverage can also mean accepting a high risk.

Scalability - An attractive appeal of forex trading is the high level of flexibility in regards to the size of position. Micro lots, mini lots or full size lots are given by most brokers. A trade based on the micro lot equals $0.10 for each pip, a trade in minis equals $1 and a full size lot equals $10. This variation in pip risk offers more control and limits the exposure for the trader.
24-hour trading - Irrespective of your physical location, the forex market is up and running somewhere in the world. All that is necessary to trade is access to a computer and a reliable internet connection.

No or low fees - Forex trades include no or low fees. In place of a commission, a broker is compensated by accepting a spread in relation to the difference in prices on the buy side. The amount scalped on each trade can vary based on information like the time of day, currency pair, and broker.

Software and data - Most brokers in the forex market give access to a range of resources such as those on trading software, free charting, and real-time data. Information of this type is rarely offered in most other types of trading, so it is a significant plus for those entering forex trading
.
Cons

24-hour trading - Even though it is possible to traded 24 hours a day, it is rarely an advantage to enter the trading arena any time of the day or night. Aim to observe the major markets (Asia, UK, and the US) and start trading during the peak hours. Trades are most active and have follow through during peak hours. Trades instigated during the off-peak hours may see minimal movement.

Competition - The forex market has many major traders working on behalf of the large financial institutions. Due to the high volume of trades this has the potential to push the prices around. A single trader should use a well-researched trading strategy, discipline, and use tight risk management to help maintain control of the trading position.

7 Keys To Successful Day Trading

1. Successful traders stay neutral:

Staying neutral means to be emotionally detached from your trading decisions. I've met many day traders that were emotionally suffering for the rest of the day after losing $100 or even less and when they made $1000 they would be "on top of the world". They are definitely not trading neutral.

If you are like that, then your trading will definitely be driven by fear and greed; if you are down $100 you probably don't want to take a loss, just because you know that you will be emotionally suffering. If you are up $1000 you might want more, even though you should take profits. Or you might end up taking profits way too early because you are afraid that the position might turn against you. The professionals don't let the day-to­day oscillations in their account faze them. The results of one week don't matter much, not even the monthly results. It's just a small blip of time in their career, so the day-to-day oscillations don't really matter. Emotional ups and downs are pretty normal for beginners. If they influence your trading decisions too much, then I would strongly advise you to go back to paper trading in order to gain the confidence you need to not let those oscilla­tions affect you too much.

Staying neutral also means to see the price movements like they really are, not how you want them to be. You might all know the situation where a trade is going against you, and you start looking for other reasons why it is still a good trade and you should hold it. This is very dangerous since it leads people to breaking their stops and to lose big. Your entry and exit crite­ria has to be absolutely clear before you make a trade. Switch­ing strategies while you are in a trade is one of the worst things you can do. You can always find a reason for your position to go up or down, but you don't see the actual price movement anymore. You are shifting from reaction to prediction! A day trader should under no circumstance try to predict future price movements. As traders we have to play the actual price movement, not what we think the movement should be! Please leave pre­diction to investors. A lot of times I see traders taking positions in stocks they know very well fundamentally. They mix trading with investing. This is very dangerous too. While there might be reasons to enter a position for a short-term trade they often end up holding it as an investment if it goes against them. Just think about Enron.

Yes, there were points during the Enron sell off where a trade would have been justified. Even I held Enron for a short recovery from about $8.5 to $10. The problem is, that if you base your entry on the belief that the company is cheap and it has to recover, you will be more and more inclined to hold your position or even add to it once it goes lower. The stronger your opinion on a stock, the harder it is to make decisions based on the actual price movement. I would strongly advise you to have a separate account for fundamentally based trades. A day trading account gives you too much leverage, making it very tempting to take risks that are way too high!! I am not saying that it is not good to have expectations; everyone should know what his potential trades are most likely going to do. Should those expec­tations be wrong though, then we have to accept that and react according to what is really happening.

2. They are not afraid to place a trade:

Fear or a lack of confidence in your trading decisions makes it hard to enter trades in the first place. You will often find yourself letting good opportunities pass by, or you are waiting for additional confirmation that the stock is going your way, which makes you enter trades too late and you end up chasing the stocks; often getting in at the end of the movement. Fear of losing money makes it harder to take losses. To much fear will either make you not take losses at all and cause significant draw downs, or it will make you take losses to soon, before the actual stop price was hit. Confidence in your ability to make good trading decisions will help you to be patient since you know that eventually there will be good opportunities. Traders with a lack of confidence tend to look for different trading strategies every time something goes wrong for them. They are therefore never able to focus on one strategy and master it. Even if you are a experienced trader you might lose some confidence once in a while. Go back to paper trading or to trading small shares in order to get yourself back on track.

3. Successful day traders only use risk capital for trading:

If you are day trading with all the money you have without having another income you will be way too scared in order to make any neutral decisions. There is a saying that scared money never wins. I have yet to see a trader who was able to live off a 5K trading account without any additional income.

4. They focus on a few strategies that suit them well:

Many traders try to implement too many strategies at once. They think they have to make money every day. The most suc­cessful traders I know only have a few strategies that they are highly successful with, sometimes only one. The goal is to find a strategy that YOU are comfortable with and to master it. This won't come overnight. Of course you need to have a look (and try) different strategies until you find something that you are comfortable with. Keep in mind that no strategy works in every market. Therefore it is normal to sit on the sidelines every once in a while. You don't have to make money every day. The key is to only trade when the odds are in your favor and to stay in the game. Once you have established a "bottom line" strategy you should slowly move on and implement other strategies.

5. They are patient:

This starts with patience in your learning process. Take time to trade on paper for a while. You will make mistakes and it will take time to get comfortable with your trading decisions. Please make your mistakes on paper; this will keep you in the game. If you absolutely want to trade live right away please do so with a very small amount of shares. You can make a lot of mistakes if you are trading a small amount of shares. If you use your full buying power though one blown stop can wipe you out. I have yet to see a trader (including myself) who didn't blow a stop at least once!!

Patience to wait for trading opportunities is very important too. As stated above, not every strategy works every day. You might have to wait a while to find a good trade. It can also happen that you have a losing streak. A good trader will not worry too much about that and will do something else. Sitting in front of your computer trying to make back losses is the worst thing you can do. I would strongly advise you to set maximum losses per day, week and overall. Stop trading immediately if your maximum losses are hit. Remember, as long as you stay in the game there will always be another day with new opportunities.

6. They are great money managers:

A good day trader will never risk more than 2% of his trading capital on a single trade. This means that if he has to take a stop, the amount of money he is wiling to lose will be no more than 2% of his capital. 2% is the absolute maximum. You should attempt to risk less than that. The reason why this is so important is that even if you are right 99% of the time you can still lose 10 times in a row. Every once in a while this might happen to you. Only if you risk little money you will be able to survive such a draw down.

7. Successful traders - Trade with Confidence:

I believe that trading with confidence is by far the single most important key to successful day trading. The most successful traders I know only use a few basic strategies. What made them so successful was the confidence in their trading strategy, their ability to stay neutral and to execute their trades according to what they see.

Disclaimer: Trading financial instruments of any kind including options, futures and securities have large potential rewards, but also large potential risks. You must be aware of these risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This article is for educational purposes only.

Reasons Why Forex Traders Need A Trading Plan

In forex, a solid trading plan will define how you enter and exit trades, how much you risk per trade, and what adjustments you should make. Having one will help you keep track of your trading progress better and it will help you avoid mistakes, but it requires a lot of discipline to stick to the plan. Fortunately, enough practice and screen time will equip you with the self-control needed to follow your trading plan.

In particular, a forex plan can be your best tool in making decisions while trading. You should be able to identify the various scenarios that could take place so that you can plan in advance what you will do in each situation. With that, you will simply have to follow your action steps instead of being confused with several emotions when something that you didn't expect happens. This will help you avoid panic or the fear of losing from complicating your decisions.

Aside from that, having a plan while you trade will help you identify which factors help you attain wins and which factors prevent you from making consistent profits. In doing so, you can decide to stick to those rules that make good results and adjust or discard those that don't. To be able to do this properly though, you need to keep a detailed trading journal that contains your trading decisions, adjustments, and results.

Another thing to remember is that, if your trading strategy isn't giving you good results, you need to be able to figure out if this is a result of a bad plan or poor discipline. If it's the former, then you need to consult your trading journal to identify which parts you need to adjust. One way to speed up this process is being able to distinguish justified from unjustified wins. The justified win is achieved when you follow your trade plan with enough discipline and you win the trade. The unjustified win is made when you don't follow your trade plan but still manage to win the trade. This evaluation should be part of your trade journal.

If you already have a good number of trades that you can evaluate, you can be able to tell if your losses are a result of a weak trade plan or poor discipline. In particular, having more justified wins that you have enough discipline and that your trading plan is working. However, if you have more unjustified wins, you need to make some adjustments in your current trading plan.

Day Trading Companies - Top 3 Places To Trade Stocks Online

Are you finding it hard to decide what trading company you should go with? They all are fairly similar when you look at them from an online standpoint, but what about performance? What can you really expect to get from the top companies in the industry? This guide will help you decide what companies you should consider if you are thinking about trading stocks in the near future.

#3. American Trading Consultants LLC

Advantages of using American Trading Consultants LLC
• Free 1 on 1 training and education to help you learn how to invest in stocks better
• Technical Support offered 24 hours a day
• Software available on all mobile devices including Android smart phones
• Best Education for Beginners - Step by step guides on how to start today

Disadvantages of using American Trading Consultants LLC
• Newer Company - New to most players on the online market
• No Pricing Listed on Website - you have to call to get a quote or send an email using their contact form
• No video tutorials - On the site it says they will have "videos coming soon"

#2. TradeKing

Advantages of using Trade King
• No account maintenance fees
• Free Broker Assistance
• Offers Fee Option Trades

Disadvantages of using Trade King
• Ranks last in usability - Platform does not perform like some of the other competitors
• Mobile Version does not work on Android devices, if you want to trade with Trade King, you must have an IPhone
• Doesn't offer 24/7 technical support - There support team is only available during regular business hours

#1. Options Express

Advantages of trading with Options Express
• No account maintenance fees
• Technical Support offered 24 hours a day
• Easiest trading platform to use
• Has the most investment options and tools

Disadvantages of trading with Options Express
• Market, Limit, and Option Fees are about $4.00 higher per trade than both other companies
• Does not allow fee option trades
• Retirement Investing is not offered - Retirement investing is important to most traders. Although, they don't offer retirement, They Do offer a lot of alternative investments that the other don't

All 3 companies have their own advantages and disadvantages; it is up to you to decide which company has the perfect fit for you and what you need out of a firm. If you a night trader, you want 24/7 support and if your trading frequently, you want lower trade fees. Make sure the company that you choose to go with, you can grow with.

The Balance Between Buyers And Sellers Explained for Beginners

For every stock purchase there is a seller, and for each buy there is a sell. There are huge pension funds, medium sized funds, small funds, and tiny funds. There are well managed funds and poorly managed funds. There are investor groups, individual investors who are wealthy, and individual investors who are just making ends meet. There is the odd lot investor who buys just a few shares, and the Options players and Futures players. There are also the market makers, who are the savviest day traders on the planet.

Market Makers are in this to make money for their company, but they must abide by the rules. They typically do not want to ever be holding a position at the end of the day. Their responsibility to the market is to "make a market" by stepping in if there is no buyer or no seller. The rest of the time, they are buying and selling just like any other professional trader. If someone places a market order, they can to some extent dictate the price of that order based upon supply and demand. However the popular notion that market makers are "out to get the little guys" is inaccurate. The reality is that most retail traders aka "the little guys" trade in 100-500 share lots. It would be impractical for the market maker to chase such small orders because there would be no profit in it for them. However there is also something far more important that has happened to the stock market and the market makers role in the past few years.

Nowadays most stock orders are routed and executed automatically. It is estimated that about 80% of all transactions are fully automated. These orders originate from many different venues, exchanges, Alternative Trading Systems, ECNs, and foreign markets. This means that your order is matched with the opposite required order to fill but not by a floor trader for a market maker as was the case in the past, but with a computer program that matches up the orders and fills them automatically. Sometimes new beginner investors and traders place stop losses incorrectly and are taken out of the trade, and mistakenly think this may have been done by the market maker. There are hundreds of millions of shares traded each day, and there are billions of orders placed every day. One 100 share lot order is lost in such volumes.

If you are taken out of a trade due to an incorrect placement of a stop loss, it was due to the millions of other traders who are trying to buy or sell that stock. You are for the most part totally unaware of those millions of other traders. It may also be that you are using a retail online broker that fills your order out of their inventory of stock. This occurs frequently with small lot orders placed with brokers that offer extremely low execution fees, and make up the difference with slippage on the spread.

Another factor that is relatively new to the markets is the High Frequency Trading Firms. These are fully computerized orders that are triggered automatically by an algorithm computer program. These computer based triggers can fire off 60,000 orders each minute. You need to be aware of what triggers the HFTs so that you can either avoid them, or enter ahead of their millisecond trading. By SEC law retail investors and retail traders are not allowed to trade on the millisecond, only on the one minute. This may seem unfair, but it is designed to protect you from extreme speculative trading activity.

Another new trading platform is the Dark Pool, with actually a form of it in existence since the giant pension funds were allowed to invest in stocks. A Dark Pool is a venue where giant lot orders are transactions. Huge institutions buying millions of shares of stock do not want to have HFTs disturbing price as they buy in incrementally over many weeks time. This massive buying can distort the balance between buyers and sellers if it is not done carefully and properly. Be aware of where, when, and how Dark Pool investors buy and sell.

Periodically there is an imbalance between buyers and sellers. When one side overwhelms the market with orders then the market maker as is his duty, steps in to "make the market" and either sells stock out of his own inventory or buys stock that is offered for sale. When this occurs, price can move suddenly and in the opposite direction than you expected. That is why you end up on the wrong side of the trade.

Often a trader rushes training on the simulator with paper trading. Take your time until you reach a 75-80% success rate using the simulator before going live in the market. Learn the different market conditions and correct stop loss placement for your trading style.

The Ace of Trades - 7 Tips For Flips

Tip # 1 - Don't Be Emotional:

Emotional investors make bad decisions - period. With the myriad of exciting things happening in the markets everyday, it takes a very disciplined investor to remain calm and trade only when necessary. Quite often, you'll find a flurry of information from the media persuading investors to buy, or sell, stocks of certain companies. Rather than act on impulse, I recommend that you do adequate research first.

Before buying or selling any stock, it would behoove you to review the firm's financial statements (e.g. balance sheet, income statements, statements of retained earnings, cash flow) to determine their assets, liabilities, profitability, etc. You could also listen to their conference calls and it would give you a good indication of what they're working on, along with the company's vision for the future.

In essence, you should never be emotional about your current positions in the market. If you're an emotional trader, you'll end up changing your mind too frequently to the point where you're trading unnecessarily and dangerously. Rather than succumb to the noise of the market, you must remain disciplined and base each trade on facts instead of emotions.

Tip # 2 - Start Small With Money You Can Afford To Lose:

I can't stress this enough. Many times, I hear of investors betting the entire farm on certain stocks and they end up losing everything. If you're thinking of getting into the stock market, I would recommend starting with "free-trades." There are many apps that you could install on your phone that'll teach you the essentials of stock trading. This concept is similar to how poker players join a multitude of free games to learn the basics of poker prior to entering an actual tournament.

Once you're ready, you can begin trading with a small amount of money that you could afford to lose. You NEVER want to trade with money that's crucial to your family's survival because that'll ultimately cause fear. And when you're fearful, the chances of you making sound trading decisions is unlikely because you'll always be worried.

So start small and you'll have the mental independence, including freedom, to make smart trade decisions.

Tip # 3 - Beware of the Hope Dope:

Hope is like a narcotic in this industry. Even seasoned investors tend to speculate and hope that a company's stock will perform well to the point where they over-commit to that particular stock and end up losing their shirts. While hope is encouraged in other areas of life, it could actually be a dangerous drug in the stock market similar to the negative repercussions of emotional investing. Do your best to make informed decisions based on facts.

Tip # 4 - Following The Crowd Will Take You Over The Cliff:

This leads me to my next recommendation - don't follow the crowd off the cliff! Historically speaking, the public tends to be incorrect majority of the time when it comes to investment selections. This is why there are more unsuccessful traders than successful ones. Successful traders typically go against the grain and are uncomfortable when their positions are popular.

A good rule of thumb to follow is that if 85% of analysts are bullish, this indicates an overbought situation. On the other hand, if less than 25% of analysts are bullish, this indicates an oversold situation.

Tip # 5 - Never Trade During Off-Hours:

You should never place a pending trade during off-hours that executes when the market opens. Reason being is that you never know where the market will really open at. If you're not careful, you could end up losing a lot of money unnecessarily, especially if you're trade decision was based on inaccurate data that led to excessive trading, commissions, fees, etc.

Don't let the ups and downs of the market influence your game plan. Stick to it unless you're absolutely sure that a change to your investment is required. If so, formulate a basic opinion prior to the markets opening and wait for the right time to execute your decision.

Personally, I always recommend placing a "price limit order" once you determine the valuation of the company and know what you're willing to pay for that particular stock.

Tip # 6 - Don't Be Greedy:

As an investor, you're primary goal is to be profitable. If you feel that a certain investment is nearing it's peak, it would be wise to take the profits off the table. Don't be greedy and take on more risks than you need to, especially since it's extremely difficult to time the market accurately.

If you're the gambling type and are unsure if the stock will go higher, you could take half the profits now and leave the remainder in play with a "stop-loss" in place.

Tip # 7 - Know When To Cut Your Losses:

Losses are inevitable. To be a successful trader, you must be disciplined enough to know when to cut your losses and liquidate your positions. Overall, every trader will make bad investments over the course of their career. Don't let pride dig you deeper in the hole. Admit your mistakes, learn from them, and move on. Most importantly, never add to a losing position regardless of how confident you feel about the potential turn-around.

Personally, I never carry a losing position for more than 3 days and never over the weekend in my trading account. The only time that I would is if I truly feel that the firm is facing a minor obstacle that set stock prices down momentarily but the concerns could be easily resolved.

To end this post, I leave you with a quote from renowned investor John Templeton who stated the following:

"Before this century is over, the Dow Jones Industrial Average will probably be over one million versus 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century."