Tag: Trading Stocks

Trading Stocks, Investing for the Not-Yet-Rich

Trading Stocks, Investing for the Not-Yet-Rich

I have noticed from talking to a wide variety of folks over a period of time that a lot of people who are fairly intelligent have some interest in stocks and investing but don’t know much about it. I will hear someone say “I wish I knew more about it.” For some reason, it does seem that many did not get much exposure to personal finances, stocks and investing in the public schools. Is it any wonder that many folks who actually make a decent income, do a good job at work, are fairly knowledgeable on a wide variety of topics, actually flounder some in their personal financial lives?–piling up debt, living from paycheck to paycheck, not saving enough–or at all–for retirement?

Well–here is a starting point for you from a guy who went through a lot of that…I piled up debt, learned bits and pieces about stocks, trading and investing–but with some missing pieces, gaps. I even have personal bankruptcy on my record.  I hope some of what I have picked up can save you some trouble, especially if you are younger.  But hopefully, even if you are a bit older, I can share a few helpful tidbits in this short article.

Well, first of all, not much in life is really guaranteed. You do have to take some risks to have a chance at greater rewards.  And even seasoned, experienced, successful stock traders are wrong some of the time. If you can accept that, read on…

Some basic starting points are to realize that there are different styles of trading stocks and investing in stocks. Many of you might have a 401k or 403 retirement plan at work.  There are probably different mutual funds available that invest in a large number of different stocks. If you have such a plan and the company matches part of what you put into it–you must do this!  Sure, the stock market will have dips and rough times over the years, but if you are getting “free money” in the form of a company match for part of your contribution, you absolutely should take that…and you generally have a tax break on top of this.

Another form of investing is value investing which is what billionaire Warren Buffett does, largely through the vehicle of his company Berkshire Hathaway. He buys shares of different companies, often when the price of the stock is down some but the company still has some underlying strength, value. And he holds for a long time.

Another form of stock trading/investing is something to consider for those without a huge nest egg who want some method to actually have a chance at becoming a millionaire within a relatively short amount of time. Become willing to learn more about either day trading and/or swing trading low priced stocks.  One of the best books to give you insight into the minds of people who have successfully gone from rags to riches doing this, featuring their learning curves and mistakes along the way, is “Momo Traders” by Brady Dahl.  There is also a free book that you can google and read online by Timothy Sykes called “An American Hedge Fund” which details his ups and downs taking a few thousand dollars of Bar Mitzvah money as a teenager and becoming a multimillionaire in a few short years.  Sykes also teaches now and you can find some free videos on you tube with him.  If you want, you can also go to profit.ly on the web and become a Pennystocking Silver member, paying a monthly fee to have access to a huge amount of educational material, a chat room, etc.

One important word of advice–as you gradually become more familiar with recurring patterns in the stock market, you can also gradually scale up some of the money you put into each trade. If you are starting with a very small amount but want to get your feet wet, one good place to go is www.robinhood.com –they do not require a minimum account balance and also charge $0 commission for trading stocks.  Once you have $500 or more, it would be good to open an account with ETrade…they have better execution on trades overall, and also have more low priced stocks available for trading…plus once you have $2,000, you can also short sell stocks which means you make money on the stock when the price drops. If you have less than $25,000 available for trading stocks and want to make Day trades –buying and selling the same stock on the same day–you are only allowed to do three Day trades per five trading days. So, if you have a small account at, say, Robinhood and ETrade, you could actually do six day trades per five trading days (three day trades x 2 accounts).

I have found for the smaller investor especially, that StocksToTrade is the best software to use to help with your trading. They show percentage gainers pre-market, have live Level 2 where you can see blocks of buyers and sellers for whatever stock you are looking at, capacity to make your own specialized, customized watchlists, the ability to practice “paper trading” (without real money to practice your strategy and gain skill) and other features, such as news on the stocks you have on your radar.

Some of the low priced stocks are not good companies–what you are trying to get good at is taking the “meat of the move” on a stock when it spikes upward…then get out of most or all of your position when it appears the stock rise may be weakening…or even before that if you want to be extra cautious. Some of the low priced stocks that spike upward temporarily may actually be part of what is called a “pump and dump”–which is a term for a stock that might be heavily promoted by people who are paid to do the promoting via various means such as newsletters, e-mails, various advertising, etc…and the stock price almost always ends up going back down eventually.  Some traders make money also when the stock begins to crash by engaging in short selling as mentioned above. You have to have a little bigger account to short sell, plus there is a bigger risk–you could blow up your account and lose big if the stock keeps going up instead of dropping in price.

One of the most important rules for successful stock traders is this–cut losses quickly. Don’t fall in love with the stock and don’t let Hope be a strategy–just get out of the trade with minimal losses if the stock did not do what you thought it would do. No one is right on every trade.  Even guys like Tim Sykes and Tim Grittani who became millionaires from trading only have winning trades a bit over 70% of the time…but they learned to usually minimize their losses.

And don’t argue with what the price action is telling you when you trade low priced stocks. You can perform some intellectual gymnastics and rationalize why this or that stock should behave a certain way–and your reasons may be impressive and well-researched–but if the price action in the real world that day isn’t behaving like you think it should…well, the price action wins.

Holistic Abundance Inc. will become a company worth millions of dollars over the next few years…and the reason is because the company will be following rules that successful traders have used.  It doesn’t even matter if our online store or other sales ventures make much money, although we will still be involved in those aspects of the business–those rely on, depend upon, other people deciding whether or not they will buy something from us.  But with stocks, and forex also to some degree, you will make money over time if you learn the patterns, follow some good rules, minimize losses…rinse and repeat.

–written by Kirby Scott Coe, R.N., President of Holistic Abundance Inc.