Trading stock markets has been around for over 200 years here in America. This means it has and is a good way to make money. However the new stock trader almost always loses money. On the surface stock trading is simple. Everyone understands buy low and sell high. So all you have to do is buy a stock and sell it when you are satisfied that it has gone up enough to take your profit by selling. This is the majority of new stock traders.
Oops you just lost 20% of your investment. Would you like to know how to actually make money on your stock trades? Of course you do. Once you get experienced in the market, you can move into the explosive profits found in trading options, but to start you need to learn the basics of stock trending.
Every segment of stocks will have a trend. Depending on the news in a sector, the stocks in that sector will trend up or down in the case of bad news. Just be aware that in general, good company stocks tend to go up long term. Any stock you are interested in needs to be researched to determine what the trend is. One of the best ways is to use what is called the 200 day simple moving average (SMA). When the price is below the SMA then the trend is down and you should be poised to buy. When you buy, is when the trend starts back up. Get the idea?
There is a better method albeit a bit harder. This is to look at the history of the stock closing prices and determine what kinds of trends you can see based on the hills and valleys. Is it a seasonal trend? Is it a dividend date? If you can see a pattern, you have a good chance of buying low and selling high.
If you think that you now have a decent feel for the stocks trend, now you have to make a decision when you should enter. Buy and hold doesn’t work anymore so you need to buy the stock when it is down for a reason not related specifically to it such as a crash or a sector issue. In technical jargon, this is called a discount or a pullback. As a rule you always should buy a stock on a pullback and you always can buy on a pullback. No stock ever follows a strait line.
Once you learn how to take small profits on stocks by educating yourself on trends, then and only then should you venture out into stock options or trading on margin. You can’t swing for the fences before you know how to swing a bat. Do your research and start small. Do this and you will make money in by trading stock markets and perhaps even build it into a career.