Stock Trading Tips For Newbies

“What has happened in the past will happen again. This is because Markets are driven by humans, and human nature never changes.”-Jesse Livermore

Let me start by setting a few things straight:

1. These are financial tips and in no way telling you what stocks to invest in, and you must do your own research.

2. You will not become rich ‘overnight’ unless, of course, you have a million dollars, to begin with. If you have a million dollars, I’m surprised you waste your time reading medium articles written by little old me.

3. Do not invest your mortgage payment, children’s college fund, or your life savings. Only invest what you are willing to lose. Maybe start by raiding your kid’s piggy bank for funds.

My Experience

I have been trading on and off for about fifteen years. I have made money trading to pay off debts, pay for vacations, and even funds to buy my first house. I have a full-time job and only trade for ‘fun money,’ but I have learned many valuable lessons along the way that everyone should know before trading.

I was introduced to the world of stocks by a friend in 2003. He was invested in mining companies. At the time, the price of gold was $300 per ounce. He would always say, ‘Gold is going to $1000 an ounce.’ People laughed, but guess what? Six years later, it was $1,000. Today gold is around $1770.

So what does this mean for mining companies?

From the charts above, you can see how the price of Gold affects mining stock prices.

Let’s do some math. Let’s say our little miner, Jonny Goldman, gets $10 per hour. In one hour, he digs up one ounce of gold. The mining company, bar any expenses, make $300 and pays Johnny $10. The mining company nets $290 per hour. Simple right?

Now let’s say in six years, the price of gold goes to $1,000 per ounce. Our good old Johnny gets a dollar raise every year because he is fantastic at finding gold. So now he makes $16 per hour. For that one hour of work, he finds the same amount of gold, one ounce. But now he gets $16 per hour, and the mining company earns $984 per hour for the same amount of work. Easy profits! As the price of the yellow commodity increases, the mining company becomes more valuable. In turn, the stock price rises.

Many other factors can affect the stock prices, such as mining collapses, mining expenses, interest rates, economic events, and even terrorist attacks and wars. But you get the idea. The more valuable a company is, the better the stock performs.

How do I make money in the stock market?

It is so easy to buy stocks. There are various platforms, E*TRADE, TD bank, Schwab, Webull, and Robinhood. I use both E*TRADE and RobinHood. They all vary, and some are better than others. The easiest seems to be RobinHood and Webull.

Just in case you’re a martian and don’t know what trading stocks are, I will explain;

Let’s say you want to buy one share of Apple. (Today, it’s $134 per share. 4/25/2021) let’s pretend it’s $10, so it’s easy.

One share will cost you $10

Two shares will cost you $20, and so on.

If, after you buy the share, it goes to $15 per share. Your one share is now worth $15 (if you sell it, remember this, we will touch on this later). This means you have made a $5 profit, which is 50% of your investment.

If, of course, the stock goes down to $5, then you lose $5, and you lose 50% (if you sell. Yes, I’m to getting this, relax)

Another type of trading works the opposite way, called ‘shorting a stock.’ I will not get into that. It’s just an added risk you don’t need.

Please understand that before we go any further, stocks such as GameStop, Nokia, and AMC that exploded back on 2/2/2021 are not ordinary. Stocks do not run up 500% in a day or 1000% in a week. So please get that out of your head. But understand this, stocks do go up and down. I will say that again!

“STOCKS, GO UP AND DOWN!”

Why? Because people buy and people sell. Sometimes, more people buy because they have extra money, and sometimes more people are selling because they want to buy a Ferrari, or like me and you, a pre-owned Ford. This is what causes stocks to fluctuate. This is normal and to be expected.

Trading

There a two major types of trades.

‘Market trade.’

‘Limit trade.’

There are variations of a ‘limit trade,’ but we will focus on two of them — the simplest.

A ‘market trade’ means you will buy or sell a stock at the price it’s at currently. (Warning.- the market can be very volatile. The stock may be at $10.57 when you type in your order, but your transaction usually executes by the time your transaction executes. between 2–30 seconds, the stock may be at $10.41 or $10.69, so be careful.)

A ‘limit Trade’ means you will buy or sell a stock only at a specific price or better. This is your safest type of trade.

‘Limit buy.’ Let’s say Apple is at $10, but since you want it cheaper, so you can buy more, You enter your limit buy price at $9, and when, or IF, the price drops to $9 or below, your order will execute.

‘Limit sell.’ Let’s say you own Apple, and you want to sell it. It is currently at $10, but since you want to make the most profit, you will only sell it for $12. When and IF the stock hits $12 or higher, it will execute.

Warnings

There are risks with everything, and I hope to make you aware of them and try to avoid them. I will cover a couple of.

When you buy a stock, even though you own it, there is electronic paperwork behind the scenes. (This is nothing you need to read or sign) So once you buy the stock, you can then sell it again moments later and more paper behind the scenes. BUT, because you bought and sold before the paperwork was complete, you now have one more trade available with those ‘unsettled funds.’ Technically, you have traded with funds that have not cleared, so these funds are paused. No biggie, but here’s the danger,

Let’s say you bought Apple at $5 and sold it at $10 the same day. The stock drops to $8, and you decided to buy back in with your profits. So you buy back in at $8. Yeah!!! Now you wait, hoping it goes back up to $10. Unfortunately, because you have used unsettled funds, you are now locked in for possibly two to three days. Fine, if the stock rises, but what if it drops? You can’t sell. So be careful.

A trick around this is to invest portions of money that you can rotate between cleared funds and unsettled funds.

Another warning as to RobinHood and possibly other platforms. If you make multiple trades in a three-day grace period, you will be flagged as a DayTrader. Once that happens, you need to have at least $25,000 in your RH account.

For new traders, it’s wise not to jump in and out of stocks, start with small amounts of money and make one buy and sell per week.

Fundamentals

It would be wise to begin reading article videos on trading charts and reports. Here are a couple of things to look for. But don’t become overwhelmed with these.

A company report.

Is the company healthy?

Does the company make profits every quarter?

Is the CEO competent and proven to be a good owner?

Does the company make good choices?

If anything, learn the basic understanding of charts,

Volume

Moving averages

Trend lines

Resistance lines

Support lines. These are key basis indicators. They are easy to learn and understand. A stock price bounces off of support, but they struggle to break resistance. They move on trend lines or channels, and you want stocks to go up on significant volume, down on light volume. All these indicators and rules determine where a stock is going, up or down.

Vital tips you must learn and adhere to!

Never trade emotionally, along with patience, are the two biggest things a new trader must learn.

Never chase a stock. If it has run up, never try to buy it. The trick is to buy low and sell high. Study what it has done in past charts and determine how high it could go. Do not be emotional; if you need to, let it go and find another.

With anything, being emotional causes us to make mistakes. The same is true with trading, and once you get angry because a stock is going down, emotion tells you to sell even if it’s at a loss. If a stock rises, you emotionally stay invested because you want it to keep going up and up.

When a stock goes down, remember that it will come back up. Stocks that explode upward need to rest after some time and pull back.

I like to buy near the bottom and sell near the top, don’t be greedy. Have a game plan and a price target of when you will take profits or how much your willing to lose before bailing; once you have a target price, stick to it no matter what. Do not reminisce. Move onto the next stock and don’t look back. Never become married to a stock. There are more fish in the sea.

This is vital,

The feeling of not taking profits and a stock crashing and losing everything IS WORSE than taking profits, and the stock rises, and you could have made more. TRUST ME ON THIS.

Be happy to make a profit, don’t be sad that you could have made more. This will mold your further trading and establish you as a solid trader and not a greedy one. As you learn more skills, then you can take more risks.

One other thing to remember, you only win or lose when you sell your stock. As long as you own the stock, you're still in the game. So choose wisely when you sell.

In closing

Start with a small amount of money. Buy and sell one trade once per week if you invested $500 and make 10% in one week. Maybe even making two trades at 5% each trade. You would have made $200 in profits in one month, more if you reinvest your profit, but this is once you gain experience. Learn the simplest things, charts, and indicators.

Never trade emotionally and be patient with stocks. Allow them to breathe and show you their hand.

I hope this helps if you are new to trading or even a veteran at it. It would be best if you did your own research and trading based on your own knowledge.

Happy trading. Start small. Learn as you go. Don’t be greedy and never trade emotionally.

This article was originally published on Medium by the Author

https://link.medium.com/LtKGJ2yQrib

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Robbie Sheerin was born in Scotland and is a quality inspector who enjoys classic sci-fi. He is inspired by such writers as Asimov, Bradbury, Serling, and Dan Brown. Robbie is married with one daughter and lives in New England, USA. He writes in his spare time and has been published in numerous online journals and magazines. He writes on Medium Robbie is also on NewsBreak as THE HUNGRY TRAVELER.