Investment Basics

There are upsides and downsides to online investing mainly because of the countless choices available. On one hand, these choices make for many opportunities to accumulate wealth by making substantial profits on stock trades and investments. On the other hand, these same choices can be the trap that makes every single cent goes down the drain like so much water.

Indeed, there is a thin line between earning and losing money in stock trades. In turn, the thin line is influenced by many factors from the personal approach of the trader in regards to stock investments to the professional credibility of the men behind the stocks' issuing company. The best that a beginner stock trader can do is to learn everything possible about the wealth-building activity, of which the following tips are a few of the most valuable.

Formulate A Trading Plan

Strategy - this is the foundation of successful trading and investing in the stock market. It is the game plan by which the uncertainties of the market can be overcome and, thus, a profit can be made 99%, if not 100%, of the time. There are so many things to consider about a trading strategy that learning all of them in one day is practically impossible but these tips will be of great help:

• Risk refers to the amount of money that the investor is willing to gamble in stock trades in relation to the total investment portfolio. For example, at any given time, you can afford to lose only 1% of your $10,000 portfolio - or $100 - on stock trades for the month.


• Entry and exit strategy pertains to the plan of attack when the trader will buy and then sell a particular bundle of stocks to and from others with the ultimate aim of either maximizing profits or minimizing losses. The questions in this regard will include: At what price must the stocks be bought for an expectation of profit in the future? At what point must the stocks be sold to lessen the risks for losses in an unfavorable market?


• Tools and techniques must also be used in the trading plan as it is essential to know about the liquidity, stability, profitability and solvency of the issuing companies. Stock screens, newsletters and other investment criteria should also be applied in the plan.

Once you have a rational trading plan, it will be easier to make a profit based on logic instead of being carried away by your emotions.

Find A Discount Broker

But of course, you also want stockbroker to handle the transactions for your trading account especially as many companies prefer shareholders to enter the stock market instead of directly purchasing from them.

For beginners, we suggest finding a discount broker so as to save on costs. In most cases, the commissions, brokerage fees and other transaction charges are on the low end, which means that your profits will be higher. You may, however, opt for the full service broker if you think that the higher costs of services offset the potential profits from the trade.

We also recommend paper trading accounts for practice purposes. You will then be able to hone your chops before risking actual money in stock trading.

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