Now before you begin forget the stories of day traders becoming millionaires or of making a full time living from a brokerage almost immediately. A combination of commissions, fees and gains taxes can eat heavily into a day traders profits. It’s not unusual for people to buy stocks – sell stocks for months without making any profit.

Some people rush in – lose their confidence and give up in no time. You have to learn to gauge the markets and this takes time. Of course you don’t want to lose money and you won’t if you take a cautious and steady approach. In other words walk before you can run!

So What’s the Procedure?

Well first of all you need to get a real-time stock quote to reveal the current price of the stock you want to buy. Many brokerages provide these real-time quotes as part of their service. A good trader will constantly follow the pattern of any stock price wise to monitor fluctuations. Delayed quotes found on some financial sites are at least 20 minutes behind the actual market. They can be useful but try not to rely too much on them. A delayed price can differ greatly from a quote in real time. This in turn can affect profit or loss.

Secondly you will get to the point where you decide to make your trade – the bit where the heart beats just a little faster! You can place what we call a ‘Market Order’ or a ‘Limit Order’. Market orders as you may already have worked out go to work at the current real time market price. The limit order will only execute at a price specified by the trader or even a better price. You set the limit so if this isn’t reached then the trade won’t go through.

There are various options available from brokerages with the aim of preventing high losses when the stock price starts to fall. In otherwords they provide a safeguard for you.

• A stop order is a type of market order that comes into action when the price falls to a level the trader sets. It executes at the real time market price though, and not at the stop point.
• A stop limit order executes at a price set by you rather then the real market price. Because the markets can sometimes move so quickly the broker may not be able to carry out the execution at your set price. So the stock owned by you may continue to drop in value.
• A trailing stop order executes after the price falls through a mark set by the individual. But its selling price is actually moving instead of remaining fixed. You can set the markers either as a percentage or in points. The sale will go through when the price falls to that amount. If the price goes up then the markers move with it. Let’s say your stock is trading at $18 per share and your set the trailing stop order with a four point parameter – the initial selling price would be $14. If the price then goes up to say $21, then the new selling price would be $17 and so on.

The Timing of Trades

Successful trading is all about making good decisions and you need to decide whether these orders remain ongoing for the whole day or until you cancel. Again brokerages can vary but some will let you place ‘Fill or Kill’ or ‘All or None’ orders which facilitates a part exchange rather than the complete exchange of those stocks you want to trade.

You must take into account executing a trade online is not an instant thing even if a market order is placed. The truth is it can take a little while to find either a buyer or a seller and for the electronic processes to take over. It’s also important to remember your trades will only execute when the market is open – even though you can buy and sell your orders at all hours of the day or night. It’s possible your own company allows trading after hours but this in itself is much riskier due to the number of trades taking place.

Again make sure you carry out extensive research taking time to make sure you have everything absolutely right. This not only includes the brokerage you may be using but any firm you plan to make an investment in. This might also include studying financial statements or annual reports.

You also need to look at what we call the ‘Edgar System’. EDGAR includes information and periodic reports from companies not only in the United States but in many other countries as well. Filing this information with EDGAR is required by law.

There’s a wealth of top class information on the internet regarding all forms of stock trading.

 
‘THE WHOLE POINT OF A MARKET TRADING IN STOCKS IS TO ACT AS A CATALYST BRINGING BUYERS AND SELLERS TOGETHER. THIS IS TO REDUCE THE RISKS OF INVESTING. IT MAY LOOK AND SOUND A LITTLE SOPHISTICATED BUT A STOCK MARKET IS ACTUALLY NO DIFFERENT TO ANY OTHER MARKET’!

REMEMBER IF YOU COME ACROSS A STOCK AND IT JUST LOOKS TOO GOOD TO BE TRUE THEN AS THE SAYING GOES IT PROBABLY IS!!

Stock trading can quickly become both a fascinating and lucrative hobby or it may propel you into making a decent second income. Whatever your reasons for trading make sure they are the right ones. The stock market otherwise known as the secondary market should be handled with great care. What you should also note is the trading of a firm’s stock doesn’t directly involve that firm!

There are national and governmental organizations who educate investors and represent the reputation of the market generally. These are the very best sources of reliable information about making investments. You may want to take a look at:

• The Securities and Exchange Commission (SEC), part of the United States federal government
• The National Association of Securities Dealers (NASD), a private-sector regulator
• The North American Securities Administration Association (NASAA), an international investor protection organization, which also created the Investing Online Resource.

It can be both exhilarating and highly exciting watching your stocks making money on a daily basis! No longer is this the domain solely of the Gordon Gecko’s or those young city slickers. All you need is a PC, a decent credit score and enough cash to open an account.

Sounds straight forward doesn’t it? But it can also be fraught with danger if handled in the wrong way. Do it right and the rewards are well worth the risk, but it’s important to safeguard yourself and be professional in your approach.

Stock Market Basics

Most people know what a share is – it’s a small part of a company or corporation. It’s a division of stock! Shareholders are in essence investing in the future of a company, and the price of these shares will fluctuate in an economic climate. When firms put out stock for sale to the public this is known as ‘The Initial Public Offering’ or ‘Going Public’. When the company makes profit they share this with the stockholders in the form of ‘dividend’. Anyone can either save this profit or reinvest it in the corporation. Stocks availing regular dividends are ‘Income Stocks’ – those being reinvested are known as ‘Growth Stocks’.

A broker is a person licensed to trade stocks through one of the many exchanges. He or she will charge a commission to do this either over the telephone, online or on the trading floor much like the New York Stock Exchange.

An exchange is just a place where people both buy and sell stocks. If you choose to do this online you’ll be using an online broker instead of a human using real money. The individual will make all the decisions and request all trades themselves. If you’d rather have a broker assist with your trades you’ll need to go a firm offering this sort of service. Before you begin choosing a broker however, you should jot down four important points:

• You’ll find a lot of companies requiring clients to have a minimum amount of money to open their account with. You should work out how much money you’d like to invest. This should be money you can afford to lose!
• Do you intend to make a lot of trades or will you buy stocks with the aim of holding onto them? Some firms will charge for account inactivity, others offer low fees per trade. Do your homework!
• If you’re a beginner then you’ll need to choose a brokerage giving you lots of guidance and information. Some will cost more than others
• Will you require any more services like bonds and futures or are you just specifically sticking to trading stocks?

Selecting an Online Broker

Remember your online broker will carry out trades on your behalf. Both stocks and money will be kept in an account. There are many companies out there just as there are many stocks to invest in however so good research is paramount! Take a look at sites such as ‘Keynote’ and ‘Smartmoney’. The fact is these brokerages aren’t ranked so you’ll need to shop around for the best deals. Any broker must have good security and should be highly reputable. Check out ‘The Investing Online Resource Centre!

Opening an Account

In the United States you’ll be asked questions about your financial past and possible investments. This is to protect you from delving in trades you can’t handle. They’ll need the usual basic information but also your social security number. Your investments will be tracked by the brokerage in line with tax regulations.

What Sort of Account Will You Need

 

You’ll need to decide between an individual or joint account and remember there are other accounts for retired people or children. Next up will be a choice of either a margin account or cash account. A cash account works in the same way as a checking account but a margin account is like a credit line or loan. You will be able to borrow money from the brokerage based on stock equity you own. The margin is the equity built into the account. Collateral if you like!

‘You will need at the very minimum 50 per cent of the price of the stock you wish to buy in your account. If say to were going to purchase $3,000 of stock – you’d need $1500 in your account. The other half would be borrowed from the brokerage involved.’

After you make the buy you must retain enough equity in your account. ‘The Equity Percentage’ must cover 25 per cent of the purchased securities. If your equity percentage slips below the line the broker can issue ‘An Equity Call’. This means they are entitled to sell some or all of your assets to bring this equity back to the minimum. They do not have a requirement to contact you!

These margin accounts can be quite complicated and of course borrowing means you carry more financial risks. A cash account is much better to begin with until you get more experienced!

How Will I Deal With Storing Money Between Trades?

This is important as some brokers avail interest-bearing accounts so an individual will make money even when they are not trading. Once you’ve worked your way through the process then of course it’s time to fund your account ready for trading. Some companies will accept a check – you can make wire transfers or even transfer money from another brokerage you may have been using. Once money has found your account then the really exciting part begins.

This is just another name for Foreign Exchange Trading or if you like ‘Trading in Currencies’ – in short you may sell one currency and buy another. This can be done for business but also for speculation purposes. Individuals can trade by themselves either over the internet or on the phone.

What Does it Do?

It allows you to predict or speculate on the price fluctuations of various pairs of currency around the world. You only ever trade in pairs and it’s the largest market global market. $2 trillion are traded each more than 80 per cent purely for speculation purposes.

Who Takes Part in Forex Trading?

Individual traders apart it’s a mixture of corporations, banks, Investment managers, forex brokers, hedge funds and many many more financial parties.

How Much Money Do You Need to Trade?

Not so long ago you needed a very big fund to trade forex. But with the development of online brokers individual investors with a home pc can begin trading with as little as $200-$250

When Can I Do This?

 

Forex is a market which never stops so it’s available 24/7. You can trade full time or part time – you can trade as a hobby or to make another income. You can fit his around your work schedule or daily routine. The choice is yours. This can be done manually or even with the help of a trading robot so you can set levels and just get on with your day. The big benefit about using a bot is ‘It takes out the risks of human emotion’ – individuals can panic if something goes wrong and so end up chasing losses which is always dangerous. They can also push things too far when on a roll. The approach must be methodical and disciplined.

Can I Trade Alongside Others?

Yes you can do this through a managed account supervised by a professional trader who trades your money along with other individuals. Everyone investing in the trade will get a share of the profits and will endure an equal share of any losses. You have to be sure to select a good manager – someone you can trust – and there may be management fees associated with this. It can take the onus of you and you let someone else use their professional expertise to help make you money.

How Do Currency Pairs Work?

You’ll see the currency you are buying at the top and the selling currency at the bottom. When you see for example: EUR/USD – this means you are buying the Euro and selling the dollar. If you think the Euro is going to increase relative to the dollar then you can purchase that pair.

 

If you speculate the dollar is going up relative to the Euro you can sell the pair. All pairs are quoted on what total of the currency you are selling is required to buy 1 unit of the currency you will ultimately purchase. If 1.4 US dollars will purchase 1 Euro then this will be displayed as 1.4000. This will go to four decimal points. The fourth digit after the decimal point is what we call a ‘pip’. This is one unit of movement for the pair.

Two prices are available for each pair of traded currency – the selling price is called ‘The Bid’ and the buying price is called ‘The Asking Price’ the ask price will generally be higher than the bid price which is the price you’ll pay for executing the forex transaction. There are a great many forex trading examples on the internet so do your research.

Currency Pairings

• GBP/USD = “Cable” or “Sterling -EUR/USD = “Euro”
• USD/JPY = “Dollar Yen”
• USD/CHF = “Swissy”
• USD/CAD = “Dollar Canada” (CAD referred to as the “Loonie”)
• AUD/USD = “Aussie Dollar”
• NZD/USD = “Kiwi”

Currency Codes

• USD = US Dollar
• CAD = Canadian Dollar
• GBP = British Pound
• EUR = Euro
• CHF = Swiss Franc
• AUD = Australian Dollar
• NZD = New Zealand Dollar
• JPY = Japanese Yen

There are more Forex articles on this site so information can be broken down into small sections!