Stock Trading

Stock trading is not incredibly hard at all. First one has to decide what exchange they prefer to use and that is commission free. If not then any trades made first have to pay the trading fee to both buy and sell and then also profit, which is a lot harder than just profiting from trading. However commission free exchanges are also generally limited as to order types and features such as  good charting etc.

Next one has to link a bank account to the exchange and deposit a sum to trade with. That can take a few days and a few documents to submit. Initial funding transfers may also take a few days. Plan on a few days to a week to get started.

Next one has to know how to place an order and there are several types, but in general for beginning, only two really matter - a market order and a limit order. A limit order should be used whenever possible.

A limit order lets you set a price to buy or sell at and will not execute until the price is reached, then does so automatically. It can also be placed for the day, good until canceled or on some exchanges expire on a certain date or after a certain time, usually 30 days. Beginning traders should always and only use limit orders.

A market order is a totally different item - it's instant and at whatever price the market has at the moment. That price may also be different than what is listed due to bidding. This is governed by the bid ask prices and as a general rule a market order will buy at the higher ask price and sell at the lower bid price.

There are also other types of orders such as stop, stop limit and trailing stop. Each has a purpose but most commission free exchanges don't have those types.

Bid and ask is fairly simple, one bids to buy and asks to sell. Usually any quote will have the bid ask price and also what volume each has. When the bid volume is high - it means lots of people are trying to buy and they drive the prices lower - so it's a good idea to wait and then buy. If lots of people are asking to sell, as the volume sells off the price goes higher - then it's a good idea to consider selling. A chart generally will indicate when the direction may change. So bid high - buy, ask high - sell. That's pretty easy.

The entire objective in trading in any endeavor- even a common grocery store,  is to do only one thing - buy for less than you sell for - buy low and sell high. Most people enter trading eager to buy "something" then they have trouble deciding just when to sell. It's a good policy to start very small to learn and then do the homework first - make a watch list of prices and look at the charts first - see what is moving in price and what's affordable, then decide where in the price you will take profit and sell no matter what comes next. Any profit taken is secure money back in the bank and better than none. The people that try hold out for the cheapest price or hang on far too long to try get the highest are generally the ones that lose the most.

Many stocks also have patterns, they may rise and fall every days, weeks or months and do so regularly. Certain times of the day and certain days of the week are better than others also. And last of all certain times of the year such as before a holiday, Christmas and on quarterly accounting or inventory changes also cause price changes.  Other items such as stock splits or management changes, etc. can also cause price changes. The object is to watch for patterns and then learn how to use them.

Generally in trade one can set a price alert on an item and know when price is approaching a buy or sell point and on a trade generally most sites will send an email to notify of a buy or sell on limit orders. It's pretty much automatic once you understand how to use it. It's also a good idea to be aware of current real time prices and Yahoo Finance has realtime pricing for all TSX items. Some sites have a 15 minute delay or may offer realtime quotes for an extra fee - that's basically a waste of money. Make a watch list on Yahoo and use it to see reasonably decent charts and prices.

In trading there are a few things then to keep in mind, first, does the stock have trade volume, it's not much value if it is not trading much or often, next where is the stock in it's yearly price range, then how much is it moving in a day to be able to profit and last of all, is it affordable ? It's also good to have a diverse portfolio in time, if one item has no trade, another may be trading to ensure a constant profit. Be sure you know your reasonable buy point and also your profitable sell point and then take profits as they occur. Taking even a small profit is better than speculation on possible profits to not lose money.

In the process of earning money in trade often one can trade with as little as a half cent price difference on a very low priced stock and even sometimes trade it several times a day for profit each time. The more shares one has the greater the profits then. In the commission free brokerages there are no minimum amounts one needs to be trading - one can buy a few five cent shares for as little as a dollar to start with if they want to and build from there.

Lastly there is the concept of lots, blocks and odd lots - a lot is 100 shares, or multiple of that, a block is 10,000  shares or multiple of that and an odd lot is anything less that is an odd number. Generally in trade there is an order to it all, market orders execute first, then blocks and lots and last of all, odd lots. This is why sometimes even at price a limit order simply does not fill immediately - it has a place in the queue before it executes.

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