Now we all know that stocks represent a portion of the company with its name on them.
They generally do not exist on paper anymore, only digitally.
And these companies capital value is held in the hands of the public in the form of shares.
There are investment strategies that try to intrinsically value the companies and own a portion of a successful company for a long time as the company grows, but that's not what traders do.
We know that the value of the company itself is not necessarily the value the market gives it.
The popularity of a brand name company may increase its stock's price, just like a brand name bag or pair of shoes costs more at the local shopping center.
We as traders aren't looking to own a company, but rather profit from trading the price of shares.
As the saying goes, buy low and sell high.
That's the basis of our profit.
Before going into the basics of trading, let's remember why we chose to trade stocks: 1) High Liquidity- as opposed to real estate, starting a business and many other forms of investment, stocks are easy to convert to cash when we need to.
2) Access- Not everyone has access to starting the next Microsoft or developing beachfront property, but most of us can get access to trading public stocks online, beginning with a minimal investment.
3) Regulation- Because of strong governmental regulation and social norms, trading on public exchanges like the New York Stock Exchange is a lot safer than investing in your neighbor's hot new business idea or joining the latest network marketing fad.
4) Volume and Scale- The sheer volume of the stock exchanges allows you to trade anonymously and continue trading even when you're fabulously wealthy.
Starting your own business can only grow so big, even if you are really successful.
But trading in the global markets allows you to keep adding to your money with almost no limit.
So how do we get into the stock market? What's the stock market guide to being prepared for profits? The 5 Basics of Trading: 1) Find an online trading system to your liking.
There are a number of excellent ones that you could probably be happy with, so just pick the one that seems to best suited to your goals and time constraints.
Be sure to note their time commitment as that can play a big role in defining the enjoyment of what you're doing.
2) Next, study, study, study.
Find a good stock market guide to technical analysis.
Get immersed in the jargon, stare at the charts until they make sense.
Put in the time of developing yourself.
3) Develop a trading plan that matches you.
Don't hold your money out to the market without a solid plan.
Learn risk and reward ratios and prepare your plan for money management.
Choose the types of trades you will look for, and make plans that you can trust even when your emotions are screaming against your strategy.
4) Practice with play money.
In other words demo trade.
It used to be that if you wanted to practice trading before putting your own money up, you needed to do paper trading, writing down each trade and all the details involved.
While that's still not a terrible idea, it's become a whole lot easier.
Now many trading systems online offer free practice trading accounts (see below).
Take advantage of these and test your strategy before risking your livelihood.
5) And finally, enter the market cautiously, but boldly.
Know that you'll win some and lose some.
Some trading systems i.
e.
ETF Trend Trading system (see below) you may actually lose more trades than you win.
But the wins are big and the losses are minute but the law of averages allows you to come out ahead.
Refine your technical analysis and maximize your profits with improved money management.
Never stop learning, and always expand your growth as a trader.
Enjoy the path to wealth and financial freedom.
They generally do not exist on paper anymore, only digitally.
And these companies capital value is held in the hands of the public in the form of shares.
There are investment strategies that try to intrinsically value the companies and own a portion of a successful company for a long time as the company grows, but that's not what traders do.
We know that the value of the company itself is not necessarily the value the market gives it.
The popularity of a brand name company may increase its stock's price, just like a brand name bag or pair of shoes costs more at the local shopping center.
We as traders aren't looking to own a company, but rather profit from trading the price of shares.
As the saying goes, buy low and sell high.
That's the basis of our profit.
Before going into the basics of trading, let's remember why we chose to trade stocks: 1) High Liquidity- as opposed to real estate, starting a business and many other forms of investment, stocks are easy to convert to cash when we need to.
2) Access- Not everyone has access to starting the next Microsoft or developing beachfront property, but most of us can get access to trading public stocks online, beginning with a minimal investment.
3) Regulation- Because of strong governmental regulation and social norms, trading on public exchanges like the New York Stock Exchange is a lot safer than investing in your neighbor's hot new business idea or joining the latest network marketing fad.
4) Volume and Scale- The sheer volume of the stock exchanges allows you to trade anonymously and continue trading even when you're fabulously wealthy.
Starting your own business can only grow so big, even if you are really successful.
But trading in the global markets allows you to keep adding to your money with almost no limit.
So how do we get into the stock market? What's the stock market guide to being prepared for profits? The 5 Basics of Trading: 1) Find an online trading system to your liking.
There are a number of excellent ones that you could probably be happy with, so just pick the one that seems to best suited to your goals and time constraints.
Be sure to note their time commitment as that can play a big role in defining the enjoyment of what you're doing.
2) Next, study, study, study.
Find a good stock market guide to technical analysis.
Get immersed in the jargon, stare at the charts until they make sense.
Put in the time of developing yourself.
3) Develop a trading plan that matches you.
Don't hold your money out to the market without a solid plan.
Learn risk and reward ratios and prepare your plan for money management.
Choose the types of trades you will look for, and make plans that you can trust even when your emotions are screaming against your strategy.
4) Practice with play money.
In other words demo trade.
It used to be that if you wanted to practice trading before putting your own money up, you needed to do paper trading, writing down each trade and all the details involved.
While that's still not a terrible idea, it's become a whole lot easier.
Now many trading systems online offer free practice trading accounts (see below).
Take advantage of these and test your strategy before risking your livelihood.
5) And finally, enter the market cautiously, but boldly.
Know that you'll win some and lose some.
Some trading systems i.
e.
ETF Trend Trading system (see below) you may actually lose more trades than you win.
But the wins are big and the losses are minute but the law of averages allows you to come out ahead.
Refine your technical analysis and maximize your profits with improved money management.
Never stop learning, and always expand your growth as a trader.
Enjoy the path to wealth and financial freedom.