Trade Stock Online

Long term investors are well aware that there is no better place for a return on investment than the stock market. While there have been several bear markets in the past century, the Dow has risen exponentially since its inception. Blue chips have been the primary drivers, which are slow and steady large-cap stocks that often pay dividends. Overall, long term investing has been a profitable strategy, but due to recent increased volatility, there is now a way to make more profit in a shorter period of time. It’s to trade stock online.

Since stock market trading online became legal, and therefore popular, people have made and lost fortunes. There are many strategies to stock market trading online. The best strategies are the ones that fit your specific needs and time frames. If you’re a novice and everything seems foreign to you, there are some basic rules to follow. These rules will help you stay in the game, which will minimize your losses while you learn to trade stock online.

When trading stocks, your number one goal should not be to make money, but to preserve capital. This can be done by placing stops on your orders. The percentage used will depend on your risk tolerance. For example, if you’re willing to take on a moderate amount of risk and you buy MSFT at $30, place a 5% trailing stop on the order. This means your position will be sold at $28.50. The only way this order will not get filled is if there is a gap down in the stock price, which means bad news will drive it down so fast that it will never stop at your target sale price. This is one situation that can’t be avoided, and why you should always stay diversified.

Diversification is just as important with stock market trading online as it is with long-term investing. Always make sure that your bets are balanced. This is important because stocks often move with their sectors. Therefore, if you own all technology stocks and the technology sector gets hammered, you’re going to lose a lot of money. Spread your bets out as best you can, but not too thin. A popular strategy is to allocate 25% of your funds to cash and the rest to three different sectors. Some professionals who trade stock online also like to maintain a small short position just in case the market crashes. While this won’t make them money, it will minimize their losses.

Some people who use market online stock trading as a profession prefer to use technical analysis. There is a lot of controversy as to the effectiveness of technical analysis. If you want to stick to the basics prior to selecting a position, look for stocks with strong fundamentals, insider buying, and small short percentages of the float. A large short position can be unwound, sending a stock skyrocketing, but in most cases, they will fail, which makes those positions extremely high risk. If you want high risk/high reward, consider a biotech with potential. An FDA approval on a drug or medical device can send these stocks soaring within minutes.

If you want to trade stock online as soon as possible, there are many online trading platforms to choose from. The fees for the most popular and trusted platforms will range from between $6 to $10 per trade.