Stock Trading for Beginners

I bet you've heard about the short squeeze that resulted in a momentum boom that rose the price of a number of different stocks, with GameStop (GME). Now, it seems like no matter where you go, someone is talking about the stock market. Maybe, you've found yourself becoming interested in learning about how to make money from the market? So, you jump in and buy up plenty of GME shares - hoping to turn a profit - only to find yourself 90% down and wondering just what the hell happened to all of your money. Now you're ready to quit stock trading altogether. But, what if I told you that you fell into one of the classic pitfalls of trading and that you can be successful? It is said that 90% of traders will fail, that's a pretty bleak statistic, but then what about the other 10%? If it where impossible for anyone to turn a profit trading, then that statistic should be closer to 100%. So you have to ask yourself, what are the 10% doing that the other 90% aren't? You may be tempted to believe it to be large amounts of money and connections, but you would be further from the truth. What most people lack is the proper knowledge and mental fortitude needed to be successful. In this, and future articles, I will teach you everything I know about trading - from the basics of support and resistance, to advanced trading strategies. I hope you are ready to learn.

Now, before I can jump in and get down and dirty with the graphs, I need you to build up your foundational knowledge. For instance, you should know what the stock market is, how it works, and how you actually make money. I find that the video above gives a good outline of what the stock market is and more.

In the video, it is mentioned that as demand increases, so does the stock's price. This, in trading terms, would be the market momentum which is driven by supply and demand and is one of a number of technical indicators that track price action. When a stock's price is moving in a positive direction, this stock is referred to as being bullish. The opposite of bullish is bearish.

Price action is simply the movement of a security's (i.e. stocks, commodities, etc.) price over time, and is the foundation upon which all technical analysis is based on. As a trader, you are looking to exploit these movements in price, so as to turn a profit. We will talk more about technical analysis in a future article, but for now I'd like to point out some of the other important things gone over in the video.

The next thing the video points out is the act of selling, otherwise known as shorting, and how it affects price action. Like in all markets, an item's price is determined by supply and demand, and securities are no different. If a large number of people suddenly begin to sell their stock, it can cause the market's momentum to increase and the price shift in the downward direction - leading to a drop in overall price. Interpreting price action is very subjective, however. It's common for two traders to arrive at different conclusions when analyzing the same price action. It is important to remember that the predictions made on price action are speculative. But, the more confirming indications you have, the better. There are other factors as well that can have an affect on price action, but we will explore that later.

This brings us to the next topic, support and resistance. The concepts of support and resistance are quite possibly two of the most highly discussed attributes of technical analysis. These terms are used by traders to refer to price levels on charts that tend to act as barriers, preventing the price of an asset from getting pushed in a certain direction.

Support can be better described as a region around a certain price where a downtrend can expect to pause and possibly reverse direction due to a concentration of demand.

Meanwhile, areas of resistance arise from a concentration of selling interest.

Generally, identifying areas of support and resistance will give you an idea of how you would plan your entry/exit into the market. For example, let's say you identify an area of support around $20 and an area of resistance at $25. You could set a limit order that will trigger a buy order when the price is within the area of support, say $19, and this will be your entry into the market. You can then set a sell order at a price close to the area of resistance, and this will be your market exit.

In the next article, I will be going over trendlines and other basic technical analysis tools. I will also help you to figure out your trading plan, which will be your gospel when you make your trades. I've boldened some trading jargon throughout the article that I would advise you to look up. And finally, if you have any questions, please leave them in the comments below.