Government Secondary School Owerri Online Forum > Business


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Honeyb, there are many ways by which one can approach stock trading.  You know, as huge as stock trading is, covering the whole world, there has to be a zillion ways to trade.  So, I\'ll only discuss what I know, which is nothing relative to the volume of knowledge out there, about trading.  

There are many programs, of various prices, on the market.  The principal factor to influence one\'s choice of program or style of trading is money.  How much the prospective trader wants to devote to trading.

It\'s also important that one shops around for a stockbroker to accommodate the prospective trader\'s needs, style, and desire.  If you are trading on line, your major concern is price.  Most brokers charge $10 a trade.  Scott Trade charges $7.  I hear one on TV that charges $5.  But if they are gonna be placing the orders for you, their charges will be higher.

You\'ll also want to know the minimum required to open an account with the broker.  I know Scott Trade can open an account for as little as $500; my sister has an account with them.  However, there are others that require a couple of thousands to open an account.

My broker is a company called Preferred Trade.  They are one of those high-enders.  They charge about $13 a trade and require about $2,000 to open an account.  If there?s time I?ll tell you why I stick with them.

This far, we?re only talking about stockbrokers.  You definitely need one.  Although when you trade online you will do the actual trading, some one has to forward your orders into the pit.  There is no charge for their services, other than the commissions you pay per trade.  When you buy, it?s a trade, they charge you.  If you sell, it?s another trade, you get charged also.  In other words, to complete a trade i.e., buy and then sell, you will have made two trades and will be charged accordingly.

With what I have described so far, you will only be a cash trader.  Nest time, I will try to discuss other kinds of trading and their financial involvements.

We have covered a few basics in the practice of stock trading.  An individual\'s trading habit is very dependent on the kind of trading style he chooses.  One can prefer position trading, long term trading, intermediate trading, short term trading, active trading, super active trading, short trading, or all of the above.

While you trading habit depends on your preference, your preference depends on how much money you are willing to sink in and how much risk you are capable and willing to absorb.  To be able to operate as an active trader, super active trader, short trader, you have to apply and be approved as a day trader by your stockbroker.

Day trading can be the most exciting style of trading but it carries the most risk.  It also has the potential of higher return.  Day trading allows you to buy and sell the same stock within one market day.  If you are not a day trader and you buy and sell the same stock in one day, you may be penalized.  

You may be allowed not more than four day trades in 5 consecutive days.  You broker is best suited to educate you on their principles regarding day trading by a non-approved trader.  There other restrictions too, like when the proceeds of such a trade becomes available for you to trade with.

Day trading comes with huge advantages.  However, it is this advantage that sucks unsuspecting victims under.  Some brokers will allow you twice that amount of your equity (the total amount in you account), while others may allow you as much as four times your equity.  My broker, Preferred Trade, is one of those.  If you have $30, 000 as your equity, as a day trader, you will have a buying power of $120,000.  There are rules and restrictions.  Be sure you are knowledgeable about this if you don\'t want to get into trouble.

As a day trader, you can also short a stock.  Shorting means selling a stock you don?t own.  Since you don?t own it, you broker has to borrow it from somewhere to make it available to you.  You?ll have to buy it back to replace the borrowed stock.  For instance: if you think that the price of stock XXX is gonna fall, you can short it.  Let?s say you wanna short 100 shares.  Your broker will advance you 100 shares of XXX to sell at, say, $50.00 a share.  In time, the price falls to say 30.00, for some reason, you can buy it at that price.

Implication:  You sold your borrowed 100 shares of XXX @ $50.00 a share at a total cost of  $5000.00.  The price drops and you buy back the 100 shares of XXX @ $30 at a total of $3000.  You give back the 100 shares you just bought back and pocket $2000.00 as your profit.  But if the price turns around after you had sold, you?ll have to buy the 100 shares at a price higher than $50 a share.  Depending on by how much the price goes up, your loss will be the difference in price/share X 100.

I\'ll stop here.  Next I will discuss the various programs available to help in your trading.  As I said earlier, I know next to nothing when it comes to stock trading.  Consequently, I cannot cover everything.  However, you may ask questions and I\'ll attempt to answer them to the best of my ability.

Prince this has been very enlightening especially for me. Day Trading sounds like the ebe-ano of stock trading, but being that I am not ready to take that huge a risk at this point in my young life, I will take my time before attempting or undertaking that venture. That aside, I hear trading is a huge way to make money, especailly if you are good at forecasting et al, and knowing the right time to trade your stocks etc.

Isn\'t there a penalty for pulling your stocks early? Just curious

Over the past few year, the US stock market has been riding high. I kept  wondering why investors continue to invest when most of the leading economic data have been disappointing.

-Quaterly earning have been disappointing
- Terrible job market / unemployment reports / continued layoff
- Souring trade deficit
- Increasing national debt
- Consumers in more debt today
- Tax cuts which is currently not helping the economy
- Slow down in several economic sectors including real estate
- Rising energy demand/cost (which can cripple growth on an energy dependant economy)
- Plus the cost of the Iraq and Afghan wars

Is this the time to push the panic button? Or should one ride it out hoping for better times aheaad.
As of this weekend:
Dow   10,087.51
Nasdaq   1,908.15
S&P 500   1,142.62
Personally, i do not see an end in sight unless there is a revision of the entire US economic policy. I believe a lot of stocks are over valued a correction is in sight.


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