Simple Concepts Of Trading:
The most simple concept is to Buy stocks that are going to go up and to Short stocks that are going to go down. So as Day Traders we profit from volatility. Great Simple Definition of Volatility, is the fluctuation of price in a stock. If a stock goes from 0.84 -$3.84, this is considered a $3 dollar volatile spread! Markets that aren’t moving don’t have the ability to bring rewards are profit. The greatest ways to find opportunities is to identify Four important elements: Price Action, Momentum, Volatility & Volume. These are the four most important essentials of trading. One of the things that you will find yourself working at is finding volatility in the market by hunting for catalyst such as quarterly earnings, press releases and other types of news!! One thing I will say about the daily volume of a stock which is very important especially for new traders is that having great daily volume makes it easier for you to enter in and out of trades. You may ask why is that? Because the stock has more liquidity. If the stock doesn’t have much volume at all, then it makes it much harder to get in and out of stocks and its possible that you might not get your order filled if your buying or selling. So remember the word that I really want you to focus on is Volatility. Learn to be patient at identifying the stocks that have huge volatile spreads. Here @ millionairepennystocks.com we focus on 4 major essentials: Price Action, Momentum, Volatility & Volume.
Low Risk Trades & Great Entry Setups:
Managing your risk as it relates to trading is the most important subject you will ever educate yourself on as it relates to trading. Finding stocks that have low risk entry’s is the key to successful trading. Remember every time you trade you are exposing yourself to RISK. This is why you always want to have a risk management strategy in place. In the beginning its important to take as much profit as you can, this will give you the leverage and resources to store profit for risk management. if you go into a trade were you are only risking -$100 dollars but we have the potential to make $300 dollars, we would call that a 3 to 1 profit/loss Ratio. So you are risking $100 dollars to make $300 dollars. Also on the negative side if you are risking $100 dollars to make $10 dollars – you have a negative reward ratio and these are the type of setups that you want to stay away from. So we are always looking for opportunities to get LOW risk entries, with Big win opportunities. Keep in mind a part of the learning process is learning to identify what is a low risk entry. This comes not only through knowledge but it comes through experience & training. Having a coach or mentor is vital when it comes to learning how to trade. Watching someone that has experience trading over and over again helps you to identify 3 important essentials?
1. The times they are entering into the market -Entry/Exits
2. What Risk/Reward Ratios They Are Using – 3-1 or 4-1
3. What stocks they are Identifing as good setups
Many people believe in starting with a small or big amount using real money in the beginning; but I think that is a big mistake if you don’t have any experience trading. As a trader, coach and a trainer in the stock market, I believe that any new trader should first start off paper trading to develop a since of strategy, discipline and structure before jumping in with real money. If you are looking for a place to paper trade keep in mind you can day trade using several platforms. http://www.marketwatch.com/Howthemarketworks.com & http://www.howthemarketworks.com/ – Howthemarketworks.com is my favorite site for PAPER TRADING. Even though it has a 15 minute delay in between executions which is bitter sweet, but it actually helps you to become a better trader over time. Many of my great setups come after watching stocks for 1-5 days.
I am looking at support and resistance levels and I am making sure the stock are volatile enough to trade. This is also very important, Stocks that are volatile but moving to fast is always a mistake to play at the given moment. This is like gambling if you are trying to get a entry on stocks that are going 100 miles per hour. Its impossible to get a good entry on a stock that is moving to fast if you plan on doing a limit order because we all know you should never do MARKET orders, only because your order may feel at some ridiculous price. Imagine using a market order and seeing the stock at $1.50 but it feels your order at $1.90, Your are going to say to yourself I though I bought this stock at $1.50 which was correct but because you wasn’t educated or trained on what type of orders to use when buying stock you used a market order instead of a limit order. Market orders give you horrible entry’s and is a traders nightmare because it can feel the order at any ridiculous price. Limit orders allow you to specify your price even if your order doesn’t get filled. Its better to focus on good entry instead of having entry’s you will regret over time. This is why paper trading is so important.
I will say this, because it is so hard to get good entry’s paper trading on howthemarketworks.com because of the 15 minute delay, I use market orders, so that my order will be filled right away. This is only for practice, I like using market orders paper trading because this shows me that my timing and entry’s are really good if I can capitalize using a market order. When paper trading please practice both but when trading for real, never use market orders, only Limit ORDERS.