Stock Tips & Help

Online traders have many different options for brokerage houses to conduct business through. Some offer low costs, but also few market research resources and little guidance. Others have high minimum account balances but low transaction costs, and others charge fees for inactivity. The best choice will depend on your current level of trading expertise, how much many you have to invest, how often you are planning to trade, and whether you want to use leveraging to trade on margin. Careful research of your best-suited broker will go a long way toward saving you money from the very beginning.

Different types of stop orders will allow you to limit your losses without having to actively close out on unprofitable positions. Normal stop losses execute orders once the price hits a certain trigger point, though by the time the sale goes through, the actual price bought or sold at may be slightly different. Stop limits allow you to set your price once a trigger price is met, but the broker may be unable to execute the order at the price you selected. Trailing stops exist to preserve gains by increasing as the stock price rises in order to lock in gains if the price starts decreasing.

It’s also vital for online trades to know exactly how much profit they need to make to generate a true, after-taxes and after-fees profit. Brokerage fees, trade commissions, and capital gains taxes all need to be accounted for ahead of time so you know exactly what target you are shooting for.

Success in day trading is most likely when there is sufficient volume to generate predictable trading patterns. Less-liquid stocks, after-hours trading, and over-the-counter stocks are all significantly more difficult to trade successfully, so you must be aware of the higher risk before you engage in any less-liquid stock trading. Furthermore, even though online trading is fast, orders aren’t executed instantaneously. If your profit depends on split-second trades, it is best to wait until the next opportunity presents itself rather than risking a sub-optimal trade.

Involving emotions is also a recipe for disaster. Decide ahead of time how much profit you are aiming to make on each trade, and don’t deviate from that goal no matter what. Execute trades exactly as you planned to, and don’t follow hunches or get emotionally involved. Losing money sometimes is inevitable, but if you play by your rules consistently, your gains will outweigh your losses.