Stock Trading

Breakouts are useful strategies in a volatile market. Traders can make great returns with limited risk, that is if the trading strategy is executed properly. More importantly, you can apply it any style of trading - including intraday and swing trading – regardless of the time frame. However, breakout trading can take a lot of patience which may cause you to jump in to early and end up exiting at a loss. So how do you plan for an objective trade?

Finding the Right Stock

Breakout trading is utilised by active traders who prefer to take a position in the early stages of a trend. This strategy can provide limited downside risk if done properly. They can be the starting point for major movements in price and expansion of volatility.

Apart from the dotcom bubble burst, there was an earlier crash that sent a domino effect through the stock market.

All of us has to start somewhere. Unfortunately that somewhere isn't always a good place to start. When it comes to trading, most often than not, newbies are lured by the prospect of earning millions without realising how much hard work is needed for it to happen. Apart from that, you will need a considerable amount of capital to begin with. Don't expect to make big gains out of small wagers, especially in the stock market.

To be able to bank big profits you also have to risk big amounts of money. Unfortunately most traders, especially newbies don't have that much capital begin with. Apart from that, trading will most likely be a sideline other than a day job to have a stable source of income. One of the ways to get extra cash is to borrow from a bank. This is called a margin loan. The question is, should you risk a loan in hopes of earning a big payout?

Some say share trading is an art rather than a science, and the only absolute is market unpredictability (and that rule about using stop losses). The 'rules' below are guidelines that can help the beginner share trader in the game longer.

Get used to losing money.

Prepare your mind and pockets for losing capital when share trading. Loss is normal and necessary if you want to progress from newbie to shark.

Create a trading plan.

Due to the possibility of turning a hundred dollars in thousands overnight, many newbies are lured into the stock market. They all dream of their own rags to riches story. There is no qualification to be a trader so any John Doe can make money with enough skill. Unfortunately, some of them are carried away by the hype, thinking that they struck an untapped gold mine and all they have to do is knock on the right place.

The Myth

You trade because you want to profit, and you do this by picking the right stock or taking advantage of a stock moving in the "right" direction. Stock selection requires a lot of research and knowledge about the stock market. It's akin to choosing a great cricket team.

For the beginner trader, the 2000 companies listed on the ASX can be daunting. Research is your friend, and make sure to have a goal so you can develop the strategy to help you reach it.

Here are some tips to select the right stock:

A blog entry discussing the Australian Share Market Game

The Australian Stock Exchange (ASX) often runs a virtual share market game for schools as well as for charity. Traders / Investors are often given $50,000 of virtual cash to invest on the ASX. The number of shares are often limited to the ASX100 or ASX200 companies. The time horizon is usually a few months, from two to six months.

Read the Full Article Here.

Is share trading a gambling activity? The Australian Pocket Oxford Dictionary defines gambling as to 'play games of chance for money'. It also defines gambling as to 'risk much in the hope of great gain'. Now, old George doesn't think share trading is gambling. In that post, he says, "You used technical indicators to tell you that the balance of probability lies in your court and if it doesn't - well you must quickly initiate risk management and cut losses." A statement that contradicts our dictionary definition. So some people classify share trading as "glorified gambling." Well, if you stick to the genuine definition of gambling, share trading IS gambling. Personally, I was in denial with this for a long time. Every time someone brought up share trading and gambling I would refuse to believe it was. But surely there's more to this argument...?