Stock trading is not a risk-free activity. Although all stock traders
know that losses are inevitable, they want to minimize those losses and
still be around to trade another day. Having the right tools, techniques
and skills can help you enter the world of stock trading and enable you
to continue to trade for a long time to come.
- 1Make use of Technical and Fundamental Analyses. Technical analysis is important in finding the best entry and exit points in stock trading, fundamental analysis is important in finding the right stock choices, according to current market and economic situations.
- You can make lots of money in stock trading if you use both the fundamental and technical analyses and the best time to trade stocks are at the beginning of these phases of change
- 2Make sure you know your costs. In stock trading, you have to worry about commissions or transactions fees, you also must watch for any slippage in your trades. You might not execute trades at your desired entry or exit prices even though you may be using stop or limit orders. Slippage, which is the difference between the quoted price and the actual price for the security, is bound to happen, so you need monitor your commission costs, transaction fees, and slippage costs carefully. If the stocks that you trade are held for less than a year, the profits that you make are taxed as current income rather than at lower capital gains tax rates. For a full-time day traders, they enjoy special tax-treatment and in order for you to become that, you must be a "superb" day trader to qualify.
- 3When to stay and when to exit. Learn when to take your profits and exit and when to cut your losses and close a position before it becomes worse. If the stock market is going your way, you will be tempted by it and want to hold on to it to the absolute peak. Be wise and plan your exit points at the top and bottom of each position long before they even enter that position and, and they stuck by it no matter what. Stock trading is like operating a business, don't get so emotional and get hooked by the winning stock trade. When you have reached your target, quickly exit the market and enjoy your profits. Remember, your winning position might just turn into a loss.
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