On Line Stock Trading for Beginners

By: Anne Durrell

Maybe the idea of trading stocks online is a bit frightening to you. Or maybe you like the idea of being responsible for your own successes (and setbacks). But trading stocks online is a skill that any reasonably astute person can learn. But it is a skill, not a matter of luck. If you were to set up an online brokerage account without learning some basic trading strategies, you would probably do just as well to take your money to a casino and count on blackjack or slot machines to deliver.

Particularly in a time when the world economy is shaky, people simultaneously are curious about and are fearful of learning to invest online. The advantages are many: low fees and commissions, the vast collection of financial and investment information on the Internet, and more than a little excitement. But where should a person begin? Looking at a few basic stock trading strategies is a good starting point.

The Buy and Hold Strategy is perhaps the most basic stock trading approach. This self-descriptive strategy means that you predict that over a period of years, the price of the stock will increase. If you hold a stock for longer than a year, you benefit from the long term capital gains tax, if you are an American. The American tax code sets a lower tax rate for long term capital gains.

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Swing Trading is a stock trading strategy that depends on technical analysis of stocks. Stocks may be purchased and held for a few days to a few months. Successful swing traders use analysis of stock charts to correctly predict large upswings or large downswings. This strategy requires that you become educated on the tools of swing trading before jumping in. As is true for many investments, this trading approach does carry bigger risks than the buy and hold strategy, but it also can result in great profits for those who are good at swing trading.

A third basic strategy for trading stocks online is Momentum Trading. Momentum trading is the situation where a trader buys stocks or short sells them based on the general momentum of the market. To successfully execute momentum trading online, you need to learn the principles of technical analysis and fundamental analysis. Knowing when to sell stocks is perhaps the biggest challenge to momentum traders. To help determine this, a momentum trader examines stocks that appear to be on a long-term upswing that will last on the order of months.

Day Trading is a short term stock trading strategy that is based on technical stock analysis, the study and prediction of price movements within [rdm]the stock market[rdm]. Day traders buy stock and sell it in the same day. Stocks may be held for a matter of minutes, or hours, but it is a very short term trading strategy, and is quite risky, even for those who have the knowledge and experience to try it.

Learning the underlying principles of technical stock analysis (short term analysis incorporating market psychology) and fundamental stock analysis (longer term, holistic study of individual stocks) is advisable before starting to trade stocks online.

Other post you may be interested in reading: how to trade currency and commodity trading software

On Line Stock Trading

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On Line Stock Trading for Beginners

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