Stock Trading or Investing

What's the Difference?

To be successful in stock trading you must develop a trading methodology this could be based on either Fundamental Analysis Video or Technical Analysis Video what ever method you choose, you must stick to it with cast iron discipline this discipline must have bundled in it strict money management rules.

It is a known fact (well to be honest I have not seen any statistics yet to confirm this) that 90% of traders go bust in the first year of stock trading.

In the chart above, Moving averages are in the correct order indicating an uptrend.

Yellow balls indicating support area, black balls (bollinger spikes) indicating to move your stoploss to lock in profits.

When moving averages stacked in this order, trade only "long" positions. Additional confirmation must be followed by a SAR indication, followed by a bullish candle closing above 8ma!

Note Stochastic's streched to low peak (blue ball) while RSI is in bullish territory - price can only go one way -UP!

Traders that trade without a strategy, discipline or money management rules possibly become the 90% statistics – apply these 3 rules in strict order and you will succeed Period! Take these rules out of the equation and guess what? Stock trading becomes gambling – no ifs or butts – that is how the cookie crumbles!

On the other end of the trading scale is really what I class an Investor rather than a Trader, the definition of an Investor is one that buys stocks hoping that in time they will increase in value and he will sell the stock at a profit.

The “true trader” is one that is actively monitoring market activity, is normally a skilled individual and is always on the prowl for an opportunity to make a profit irrespective of the market going up “long” or going down “short”

Let’s proceed and explain a bit about investing in stocks.

You probably have or you will encounter the following terms commonly used in stock trading or by traders in general:

Bid: What this means is the price that the market will give for your stock

Offer: The price that the market will sell you stock

Spread: This is the difference between the Offer and the Bid price

Let’s say for discussion purposes you just bought Coca Cola for $10 a share (this was the Offer price)

Now let’s assume Coca Cola is still holding its market value at $10 when you go to sell it, however the Bid price is what you will be quoted and it will be lower than the market value let’s say it is $9.95

So the spread in this instance is $ .05. It may seem a small amount initially but when multiplied by the number of shares purchased it is a fairly large chunk of any profits, added to this will be the broker’s commission or stock trading costs and any applicable taxes.

The overall cost will probably be insignificant if buying shares and holding on to them until they rise in price but you would struggle to make a profit if you were trading frequently say in a very short spate of time as the costs for trading would certainly eat into your profits.

I personally keep away from Penny Stock trading, these are low priced stocks from small companies, they lack liquidity, can be unpredictable and are traded infrequently in a rather volatile market.

These companies are sometimes known to fold up with little warning, and penny stocks are really stocks traded outside major stocks like NYSE and NASDAQ. New traders normally take an interest in these stocks - the risk is simply not worth it!

Bollinger band narrowing (above blue ball) is a warning that a breakout is imminent. Always observe the formation order of the ma's, breakout will normally result in this direction - catch it early, in this chart it's just above the yellow ball.

Looking for a broker? Do your research on brokers, I would suggest you shop around believe me there are many brokerages out there and many good deals are to be had, after all they have opened shop only to be of service to your stock trading business.

I prefer the execution only type rather than ones that offer an advisory service put it this way if your broker could advise on which stock is good for your portfolio then what the heck is he doing on the other end of the phone.

I would also check out how much commission they would charge to purchase and sell stocks, also do not get caught out by those that charge account management fees and have hidden charges I steer clear of this kind of broker.

Which shares shall I add to my portfolio? How does one go about this? well you could use an advisory service, get tips, watch the news, immerse yourself in some investment magazines or what ever… but use these sources just only to get an idea of what is recommended –

NEVER TRADE ON OTHER PEOPLES ADVICE PERIOD!

Put your self in total control of your stock trading and deals, remember no-one else has your good intentions at heart but you!

What ever stock you intend to trade, all that matters now is “when to buy and when to sell” Check out how I use a simple but powerful stock trading strategy based solely on technical analysis, money management and cast iron discipline.

In the above video the moving averages clearly indicate an up trend the SAR indicator has also been triggered.

I would however take the "long trade at price retracement" as here we have the trend, SAR and RSI in bullish territory

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