A famous investor once said that the first rule of investing is to not lose Money and the second rule of investing is to remember the first. This quote applies to how you can make money trading stocks. Trading stocks is not a trip to the casino but rather a business that takes advantage of the ups and downs of the Stock market and individual stocks. You can make money trading stocks as a day trader snipping out repeated small profits from the up and down static of the daily markets. And you can swing trade which is buying and selling over days and weeks to take advantage of market trends. Here are some thoughts about how you can make money trading stocks.
Fundamentals Determine Stock Prices
Successful companies that sell more of their products and do a good job of controlling costs make more money. This translates into high stock prices. Trade stocks of companies that you understand. Learn how the company makes its money and how it will continue to do so, or not. Then you can swing trade accordingly. Watch the market and when interest rates go up or down and affect stock prices you can trade accordingly and make money. Along the way avoid random trading because, like we said before, this is not at trip to the casino but a job.
What Is Scalping?
Scalping in the world of stock trading is taking repeated tiny profits throughout the trading day. Traders who engage in rapid momentum trades are often scalping in day trading. These traders make their profit from the difference between bid and ask prices. Even in a flat market traders can profit. In order to successfully make a business out of scalping the trader needs to pay close attention to the market, always be aware of market fundamentals, and keep abreast of technical analysis. Despite the appearance of an absolutely flat market the price of a stock constantly moves to some degree throughout the trading day. Thus when scalping in day trading one acts as a mini trend trader as well.
The Past Predicts the Future in Technical Analysis
Technical analysis is a statistical approach to trading stocks. Certain market situations develop unique patterns in trading. By being able to identify the first part of a pattern technical traders can predict the back side and make money trading stocks. Technical traders are aware of the fundamentals that drive the market. They also believe that as rapidly as the market reacts to events, that fundamentals are typically priced into a stock as soon as events occur. Technical traders work at a trade station which has software built in to analyze price movement and predict short term movement. Traders enter trades, buy or sell, with stop losses included. That is to say as soon as the buy a stock they put in contingency trading stops to sell if the stock go up a bit or if it goes down too fast. If they bought the stock and it keeps inching up they repeatedly reset their stops to lock in profit and still protect against loss.
