COMMUNICATED – If you have spent more than a few minutes looking at the recent financial headlines, you already know that this is one of the most volatile eras in the history of the economy. It’s true not only for the stock market but also for retail, industrial and entertainment fields. Many of the world’s largest brick-and-mortar sellers of consumer goods, for instance, are moving the majority of their business from physical stores to online venues.
For individuals who buy and sell securities, this move to online activity has a lot of positive effects, one being that just about anyone can earn a living as an independent entrepreneur in the field of investing. The past couple of years have been huge for writers and experts who know how to teach trading strategies to newcomers. While it’s true that there are literally hundreds of techniques for capturing profits and building a successful sole proprietorship, a few methods stand out. Here’s a look at four of the most popular approaches used by individual investors in today’s roller coaster securities markets. If you want to learn how to day trade, you’ll need to make all five techniques part of your everyday toolbox.
Start Small
Starting small and taking it slow is the secret to success in every profession but is especially crucial for stock traders. In fact, day traders can typically avoid all the potential pitfalls of their career by learning how to make intra-day profits on very small dollar amounts. Many investors build up a capital account specifically for trading and use something called the two percent rule. In other words, they never place more than two percent of their discretionary capital on a single buy.
Take the Time to Research
No matter what your goals are, you need to study the companies who issue the shares you intend to buy. Technical buying, based solely on price action and other mathematical parameters, only reveals so much. Even if you count yourself among the technicians who use all forms of numerical formulas to choose stocks, it’s important to know the strengths and weaknesses of the companies themselves.
Use Limit, Not Market Orders
There are many types of brokerage orders, but the two you should understand from the outset are limit and market. In most cases, it’s wise to opt for limit orders. When you buy at market, you’re telling the broker to buy the stock right now, no matter the prevailing price. If you place a limit order, you are able to set the exact entry and exit prices you desire. Limit order placement is a much more precise and safer way of doing business.
Use the Five Dollar Rule
Sometimes it’s tempting to purchase low-priced shares. Not only can you buy large numbers of them for a few hundred dollars, but you have the opportunity to take advantage of some pretty wild price swings. Successful investors avoid shares that are priced below $5. Whatever it takes to avoid the temptation is worth it. Low-prices shares tend to be very risky and their price movement can be virtually impossible to predict.
