FAQ

Having a good exit strategy is one of the important components of a profitable trade. Unfortunately due to the uncertainty of the stock market, traders may find themselves exiting by their stop loss after the price plummets, even though they started well in the trade. Beginners may also find themselves hesitant in sticking to their stop loss especially when they see sizeable return for their money. Market conditions can change pretty quickly, so deciding when to exit will determine your profitability.

Mistakes will be inevitably made in trading. Unfortunately more often than not it’s at the expense of your money. However, for a beginner this is to be expected. Trading is primarily trial and error until you are able to come up with your own system that lets you profit consistently. Unfortunately, these are not the biggest mistakes you have to watch out for. More often the simple ones have more bearing.

Market capitalisation (also called market cap) is the total dollar value of a company's outstanding shares. It is also the overall value of a company according to the market. The formula for market capitalisation is the company's shares multiplied by the current market price of one share. For example, company ABC has 45 million shares outstanding, each with a market value of $100. The company's market capitalisation is $4.5 billion (45 million x $100 per share).

Establishing share trading winners is a process. If you're a beginner, start by educating yourself about the market. Set specific goals and formulate a trading plan. Next, start researching the stock and company. Weigh the pros and cons of each stock when picking your lineup, don't just rely on advice. Here are other suggestions:

• Have a set of rules that has an edge and that you consistently follow. Sometimes you will lose, but capital will increase as your number of trades go up.

The percentage of traders who fail is a daunting figure. The market has a sadistic sense of humour and traders often fail because they are not up to it. Randomness is a cause, and so is having limited trading experience. Telling the difference between random acts of the market and true lack of skill should hedge against both overconfidence and beating yourself in the head for things that are out of your control.

To earn 5 percent consistently while day trading or get a job at McDonald’s, that is the question. A realistic return can be difficult to pin down, as 'realistic' hangs upon many factors such as market movements and trader skill. As one trader put it, getting 5 percent a day is not impossible but only few traders earn this percentage consistently. Another viewed 5 percent as too high, and that 0.1% is a more realistic figure.

Blood, busted neurons and lost capital under their belts separate the big boys from the plankton. As to how the sharks reached that blessed place, they certainly did not look up at the stars for help in shedding their amateur status (although employing astrology is your choice.)

Different people have different answers as to when they are ready to trade professionally for a living. Targets depend on your personality. One trader would consider trading from home when he consistently hits $5000 month for at least 2-3 years, along with confidence that his trading strategy is working.

Stock prices are influenced by supply and demand, and other 'subtle' factors. Stock prices change throughout the day and "price" is basically a record of the last trade that closed. So how does a trade happen? Remember that there is a buyer (bidder) queue and a seller (offer) queue, both sorted by price and arranged on a first come, first served basis. When one of the bidders offers a bid amount high enough to match a seller's lowest price, or a seller lowers the price to match a bidders offer, a trade happens.

The All Ordinaries Index (AOI, also called the 'All Ords') is the oldest shares index in Australia, which is composed of nearly all common shares listed on the Australian Securities Exchange (ASX). The S&P/ASX 200 index is a market index of stocks listed on the ASX from Standard & Poor's. The S&P/ASX 200 started on 31 March 2000.

If you're a a trader, chances are you're using technical analysis to analyse potential stock. Interpreting charts can be confusing, and not mention a steep learning curve for a newbie. But they can very helpful in studying the movement of a particular stock. There are no guarantees in the stock market but indicators can at least steer you in the right direction. With the different indicators out there which do you use?

Technical Analysis - The Basics: