Is that most stocks that are trading at $5 are likely to move up to $50 within a few weeks (or a few days for larger companies) so you don't have to put up a huge amount of money to make money. A stock like Microsoft is only trading at $30 so you need to own 1000 shares of MSFT to make $1 which is rather large.
The bad news is that the stock market is a risky business and so you have to do some serious homework before investing your money. You want to look at the three big money making companies on the Wall Street like Microsoft, Cisco, and Dell.
Look at how well these companies are doing. Do they make money? If they do, are they doing it consistently? Do they have a history of bouncing between bad and good periods? You need to know this as you decide if they're a good investment.
These are things that you can learn from the Wall Street Journals or even taking a course at the local college or university. These are the tools that you need to make money in the stock market.
When you're deciding to buy a stock you want to look at how the stock is doing. How it's doing now? You need to consider if it's doing well right now or if it's making money. Or is it stuck in a bad period? If it's making money do you want to buy it or is it a good investment.
The other tool that I use to make money in the stock market is the STOP LOSSES tool. I'm a trader so I like to see the system that the broker uses to determine a stop loss. I like to find a service that lets me see the chart at a glance so I can see where the stop loss is. I can't say that I have to follow the charts with the stop loss just by looking at them, I like to see a little more than that. This allows me to see all the variables of the situation like in the last week did the stock rise above the previous week's low, did the stock fall below the previous week's low, is it trading within its trading range, and so on. I use this to try and find good stock to trade in the short term. I know how they define a short term as less than a month but I make trades in the short term as well.
What about the long term? I am not interested in long term gains, I like to trade short term gains if there are any.
You might ask if I will buy a stock that is trading at $30 and has a stop loss at $28.75.
Yes, but I have a good reason. I can use what I learned in the last week to make sure that I am not chasing a short term gain. I can use the stop loss to make sure that I'm not chasing a temporary gain. If I am trading a short term I'm not trading a stock that is supposed to be held for the long term. I only trade the good stocks that are trading in the short term and have good signs.
The use of the stop loss, in my opinion, is one of the most important tools to have in your trading box. It allows you to take small trades but still has a realistic chance of making a sizeable gain. It also allows you to take large trades that are not going to net you several thousand dollars, but still has a realistic chance of earning you thousands.
The only way I would not use the stop loss, is if I am doing a short term trade. I would have to look into a longer term trade and take into account the price and volumes. I think that I have explained the use of the stop loss well enough. Now I want to show you my use of the stop loss.
When I am trading a stock that has a stop loss set to $10 I know that I will get stopped out if I get to $11 or $12. For example if I have a 10 second stop at $11 I will only get stopped out if the stock falls to $10. This way if I do get stopped out I will not get flooded with stop orders and it will be easier to navigate out of a position.
I only use the stop loss when I am taking a longer term position and the stock is not offering me a good return. For example, I am in a position that I have a 10% stop loss at $11 that I want to take on stocks that I think offer a better return, in this case I would use the stop loss at $10 to take on longer term trades.
For example, if I am buying shares in a company and I get stopped out I have to decide if I want to either buy more shares at a lower price or I want to sell shares at a higher price and get paid at a higher rate of interest.
This way you are cutting down on the number of stop orders you have to deal with.
It all sounds pretty easy, and I have used this method and it does work quite well in my book.
If you are serious about getting good returns at the end of a 2 or 3 day position then this is the way to go. But for the beginning trader it is the best way to get started.
