The simple fact that you are willing to read about stock trading for dummies implies to me that you are no dummy. You probably need a few simple stock trading tips and a good breakdown of general information and fundamentals to get your started. Take these basics so you can begin to piece together a plan that matches your skill level. You don’t have to be a genius to be successful in the stock market, but you do need to be informed.
Stock Investing for Dummies
Before you can get involved in stock trading of any sort you have to understand the basics of investing.
The reason the majority of money is in the stock market is to invest in different companies. The investors believe a company will earn more money and eventually pay a portion of these earnings in the form of dividends to the share holder. Most of this money is held by institutions.
Mutual Funds for Dummies
A mutual fund is a shared resource of money that is professionally managed. The majority of investors don’t make their own daily decisions with their money. While there is some economy of scale with mutual funds due to the fact that the pool of money can afford professional traders and researchers, the size also limits the flexibility to invest heavily in any stock causing the gains to be washed out.
Dow Jones for Dummies
Index funds are an alternative for investors who are looking for something other than mutual funds. An index fund is a collection of stocks that make up a whole sector or whole market. The Dow Jones is the most famous of these indexes. The Dow Jones is a bucket of 30 stocks that is supposed to represent the whole stock market. These stocks can change as the nature of the economy changes. These index funds have a much lower cost for the investor to hold than a mutual fund, but they have no intelligence creating the investment.
Brokerage for Dummies
Now the investor has thousands of choices of individual stocks, mutual funds and index funds to choose from. In order to get a handle on their choices most investors end up at a brokerage. A brokerage is nothing more than an in between for the investor and the market. They are paid a commission for the sale of any of the above choices. Some brokers choose a business model that focuses on helping their customers so that the investors will earn more money, return to the broker, buy more investments and repeat. Other brokers choose to sell the highest commission products to any new investor that will listen.
Stock Market Trading for Dummies
Stock trading for dummies involves just thinking about what the investors are likely to do. Trading is about psychology as much as it’s about financials. If there are rumors that the government is going to touch 401ks there may be a pull on 401k money. The trader would think most 401ks are in large cap stocks so they will be hit harder so they focus on big caps that were already looking shaky. The emphasis is always on what others will be doing about the information you know, not always about what a company will be doing.
A couple of good stock trading tutorials can help you navigate through this area of the market more successfully.
Online Stock Trading for Dummies
If you are a lower funded trader you will likely start your career online. There are many choices of online brokers to facilitate your stock trading. The minimum balance required to open an account will vary from one online broker to the next from no minimum to $3,000 and beyond. A minimum of $25,000 is required to begin day trading, but even that is a small amount to work with in this specific niche. Online trading and penny stock trading doesn’t have the same success rate per trade as buy and hold does which means your money will move up and down a lot more.
When choosing an online broker for stock trading you need to focus on costs. Trading costs will vary depending on whether you choose a full service or discount broker. Part of learning the basics when researching stock trading for dummies is understanding that trading costs can turn your small wins into losses. You already have a learning curve to overcome, don’t shoot your chances by paying a premium for trades, but don’t focus on such low costs that you avoid some of the tools and resources that could help you achieve greater success. Find a happy medium that works for you._____________________________________