I’m calling this article trading stock for smarties, not dummies because I want to illustrate to you the stock trading does not have to be as difficult as you might think.
In fact, it can actually be quite simple but, of course, you must follow a few basic rules.
If you’ve never traded stock before or have traded unsuccessfully you have to realize that it’s time for you to learn stock trading. Whether you’re interested in online stock day trading training or you want to trade longer-term, there are tons of resources available online and offline to help you gain the knowledge you need.
Before we get into that let’s chat a little bit about what stock trading is. Trading and investing are terms that are often used interchangeably. Investing is longer-term in nature. Trading stock is typically shorter term in nature and seeks to take advantage of smaller market movements within the larger trends.
Trading stock, means that you are taking a more active role than if you are investing in stock. Let’s look at an example of a very simple stock trade.
Buy 100 Shares Of XYZ Company at Monday’s Open
Sell 100 Shares Of XYZ Company at Friday’s Close
Please keep in mind that this is just a simplified example and not a suggestion of a trade for any security. The above example is of a very simple trade that lasted for one week. Here’s an example of stock day trading using the same fictitious company is above.
Buy 100 Shares Of XYZ company at Monday’s open
Sell 100 Shares Of XYZ Company at Monday’s close
As you can see in both examples we open the trade with a buy order and close the trade with a sell order. In both cases we were “bullish” and chose to “go long” the stock. Our second example was a stock day trade because we opened and closed out our position all within the same trading day. Some stock day traders place a much greater frequency of trades during the day.
You can also see that in both examples we specified the quantity to be traded and also both examples we closed our trades using that exact same quantity. It’s always important to keep this in mind and make sure you are completely out of a trade when you want to be. What I mean by that is that when your trading method requires your position to be closed make sure that you close the trade using the same quantity of stock as you opened the trade with…That way you will not have any unwanted open positions that may potentially move against you.
Something else that’s important for you to keep in mind is that different types of stock trading will require different amounts of capital. For example, opening a standard stock brokerage account can require as little as $500-$1000 to get you started. If, however you find that you will frequently day trade than your minimum may go up if you’re classified as a pattern daytrader. A pattern daytrader places four or more day trades in a rolling five-trading-day period, stock brokerages will then require that you maintain a minimum balance of $25,000 in your account and this may vary upward depending upon the online stock broker that you are using.
So you can see trading stocks need not be mystical or difficult as long as you keep the “trading stock for smarties” attitude in mind and continue to learn while you earn while keeping things as simple and uncomplicated as possible.