Easy access from a home computer opened online stock trading to investors overlooked by the traditional brokerage firms. Online trading companies offer low cost accounts so that investors with a few hundred dollars can play along with the big traders from the convenience of their lounge chairs. Just because the stock market is open to a wider range of investors does not make it a game for amateurs. Newcomers have to get up to speed rapidly to make money in the online trading market.
After learning the language of the stock market, online traders need to choose a short term or long term time horizon. From that point you develop a trading strategy that works within your time line. Even for the fast pace of day trading, decisions cannot be made on a whim.
Ultimately the stock market is fickle, defying the best of strategies. Online stock trading requires persistence. Losses happen to the most experienced stock traders. If you want to avoid losing money, open a savings account at the Markowitz model local bank. Your money will be safe while earning less barely enough annual interest to buy fast food lunch. Stock trading is the risk/reward ratio in action. The greater the risk, the greater the potential reward. That’s what attracts new investors into the market hoping to score high returns on their money. No matter how fantastic a stock seems, never put all your money on one trade. Hold out some cash to offset the equal potential for losses.
No strategy is fool proof. To reduce your risk, divide and diversify. Depending on the size of investment capital available, divide current stock portfolio into three or four parts. Add diversification to this strategy by investing in four different industries. Or if you prefer to specialize in one industry, diversify based on risk with one part low risk, one part medium risk and one part high risk or new stock without track record. If that’s still too much diversification for you to manage, select three or four different stocks with the same risk level.
An important strategy is to manage your emotions. Online stock market investing can be a solitary pursuit. The investor can become addicted to watching the market, literally losing sleep over reading and plotting charts. When your sense of satisfaction is tied to winning and desperation follows every loss, then you have to pull back. Emotional investing is the worst possible excuse for a strategy. Any profits from that approach are pure dumb luck. Investors can get a kick out of making a good trade as long as their self image does not get tied up within their portfolio.