Stock - What Is Active Trading?

Stock market investing is a great way to make money. Buy shares at a low price, and sell at a higher price. What could be easier? Sadly, its not always that easy. However, understanding the markets and the terms used by traders can help to give you an advantage. While I wont cover them all here, below you will find a couple of examples to help you get started trading.

Stock options include what is known as a covered call. Where you purchase a stock and then go back in with a covered call to ensure if the stock goes down you will not lose your money. Short sells involve buying a devalued stock because it is showing that it will increase in the next while to help increase your portfolio. A sell stop is a term for placing a stop on a stock you would like to acquire. This means you will not purchase the stock if it exceeds your set price before you can attain it.

There are what we term day traders. These active traders will buy and sell stocks in the same day. They look for stocks that are volatile, which provides the best trading opportunities for the day trader. They sit in front off their computer and watch the markets, looking for the best chart set up before taking a position. Most day traders will look at the 2 minute charts, which suggests that they wont be in a specific position for long. Unless you have a lot of time, experience and tolerance for risk, day trading wont be for you.

While there are many books out there that say they can teach you how to trade, there is no substitute for experience. The problem is, its a very expensive way to learn. The key is in keeping a stop loss, regardless of the methodology you decide to follow. Successful day traders, swing traders and even value investors use a stop loss to help minimize the amount of downside risk they are exposed to. A stop loss is a set price at which you will automatically exit your position. Its up to the investor to decide if its at a specific percentage of the trade value, a percentage off the share price, or a certain level that is deemed to be support / resistance.

Other options for the beginner trader is to use online services that will teach you how to trade in a simulated market environment. This allows you to gauge not only how good of a trader you are, but also how well you deal with risk.

Stock market investing is a great way of escaping the usual 9-5 grind. Whether you are looking to invest for retirement, or invest so you don’t have to work anymore, if you can trade successfully, you will be able to attain your goals. Of course, it is not without risk. With a bit of knowledge and experience, you can improve your chances of making money in the stock market.

About the Author:
Visit us for more information on hot penny stocks, how to trade penny stocks online and learn to pick penny stocks (http://www.1source4stocks.com/).
Tag: stock

[tag]stock, market, active, trading[/tag]

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