Daytrading or Swingtrading: Especially online, people will throw around the terms daytrading, swingtrading, and flipping a stock. In essence, they are all similar and overlapping styles of trading. Daytrading is when you buy an sell a stock within the same day once, twice, or many times (intra-day trading). Swingtrading is usually looking for a movement within the month of purchase. Flipping a stock is a style of trading built by targets set by looking at past performance. Flipping a stock is done by buying any given stock at its bottom support levels and selling at its resistance. All of these methods are short-term trading styles. They are influenced by what is going on right now; not what/where this company is going in the future. These indicators of market movement ATM (at the moment) include Technical Analysis, Press Releases, Stock Momentum (public sentiment) and general trends in different sectors.
Trading on Margin: Many investors are timid when opening a margin account. However, opening a margin account is the only way to avoid the "3-day" rule. When you open a margin account, you no longer have to wait 3 days for you funds to settle after a stock purchase/sale. Most online brokers require a $2,000 balance to open a margin account. If you are able to open one then you have the ability to purchase more stock than a normal cash account would actually allow. With $2000 in cash, you would have the ability to purchase $4,000 in stock. However, use caution, because if your purchase goes into the red, you loss also doubles
Shorting a Stock: Shorting a stock is another perk of opening a margin account. When you short a stock, you are actually selling something that you do not have. Usually this is done with the intention that a stock will decrease in price (for a various number of reasons). When it decreases in price enough to make you a profit, then you purchase that stock back (called covering your short position). Basically it is trading, only backwards. This ability gives you a method of making money by catching stocks in a downward (bearish) movement as opposed to looking for stocks on the rise (bullish stocks).
FYI...You cannot short OTCBB, Pinksheet, or any other stocks under $5.00.
Risk Tolerance: If you were to hire a "big-shot" broker or financial analyst than they would discuss your risk tolerance, and probably do it very extensively. I will address it shortly however, becasue I believe it is an essential question you must answer before you begin trading, however the answer is very simple.
First, figure out how much you can start to trade with. $500 will open you an account to help you learn, but will not offer much return. Others may recommend different amounts, but I believe that $1500 - $2500 is a decent amount to begin with if possible. This way, you can play approximately 3 stocks at once and erase a red play with two green ones.
Second, never invest (especially in pennies) what you cant afford to lose. When you begin, it is a learning experience. Don't think of getting rich quick. The more you know, the safer your money will be. Protecting you initial capital comes first. It is better to not take a loss than to not take a gain. Pennies are not your kid's college fund. Trusts and Mutual Funds handle that type of low risk, slow growth.
Finally, when it comes to risk (sorry for the cliche) Knowledge is Power. The more you know, the safer your money is. Play safe, play smart. Make the smart trade.
$$$ Practice, Predict, Profit $$$
Opening an Account: The next step is opening an account. By addressing all of the above issues, it will make your decision about a broker much easier. Knowing how often you plan to trade, what your average trade size will be, and various other aspects of your trading style/interests will determine the broker which best suits you. The next post will layout the key points/attributes, pros/cons, and customer service experiences with the most popular, affordable, and reliable online brokers.
Article Written by Rob of Stockhideout.com HREF="http://www.stockhideout.com" REL="follow">Hot Penny Stocks
But what do you do if, at a certain point in your stock market practice, you notice that there are particular penny stocks that seem to be appreciating rapidly? By rapidly, you notice that its price moves up quite quickly over the course of hours or even minutes. You also notice that relative high volumes of the stock are being traded.
You can assess the risk of investing in the penny stocks, carefully considering if the potential gain would outweigh the risk of loss of your investment. Your choice if you want to invest or not, but whatever decision you make, don't dilly-dally make a decision, then stick to it. Changing your mind about that particular rapidly moving penny stock may make you much more susceptible to investment losses later on.
If you decide to invest in the rapidly moving penny stocks, then you are in a position to do momentum trading.
Momentum trading often gets started when penny stocks are mentioned in newsletters as a hot buy and investors rush in to buy that particular penny stock. The rush to buy the stock makes the price of the stock go up. Market makers raise the price of the stock because of the laws of supply and demand there is often not much of the penny stocks they have to begin with, and they are flooded with the demand of the stock.
Investors such as you, who have noticed that the penny stocks prices have been moving up, will be convinced that the prices will still go higher and put orders for the stocks minutes or even seconds apart from the last order of the stock.
Eventually the stock buying frenzy slows down, and successive selling drives the penny stocks prices down. In momentum trading situations, it is not uncommon to have a 10 cent stock move up to 50 cents in a couple of hours, and then go down to 15 cents after half a day. Sometimes, the price changes can be much higher and much more rapid.
Momentum trading seeks to gain profit from these quick price changes. This type of activity can be very profitable for the early buyers of the stock, if they make the right decisions and keep their greed in check.
To profit from momentum trading, you must place your buy order as soon as you make the decision to invest in the penny stocks that you have noticed. Or if you are the lucky enough to receive such a newsletter or tip recommending a buy of the particular stock, and you trust the newsletter or tipster, place the order as soon as your receive the tip.
Remember to keep your greed in check by placing a limit order when buying the penny stocks the stock prices changes so fast in momentum trading. Place that one order and wait for the price movements. Do not be tempted into chasing the price of the stock as it rises. If you do, and catch the penny stocks at the price decline stage, you would incur losses.
Momentum trading is profitable if you are disciplined and you keep your greed in check. You have identified the rapidly moving stock. You placed that one order. You did place only one order at that particular price and didn't order more as the penny stock has moved up, haven't you? Good. Now, you decide at what price you would like to sell your stock, and sell it when the penny stocks price has reached that point.
As soon as you receive the confirmation that you have bought the stock, place your next trade, and that should be a limit sell at the price that you have decided to unload your stock. Keep your greed in check. Many investors hold off selling their stock because they see the price going higher and higher. You need to be disciplined enough to buy a rapidly rising penny stock, and then sell it in as little as ten minutes later with a small but satisfying profit. By being disciplined enough to sticking to this method when momentum trading, these small gains that you make will add up over time.
Both Robs & Nir Dotan are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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