Online Stock Trading Tips

The more you can simplify a trading plan the more it will become profitable in the long run. Why? It is because trading decisions needs to be fast, consistent and accurate. The only way you can meet these objectives is to simplify a trading plan.

Let me give you an example, you are day trading a 3 minute or 1 minute chart where things can go fast. Your trading plan must adopt that speed for you to make sound trading decisions or else you miss the boat. Or you are a long term trader,you should not spend a day thinking about a simple trading move.

There are variety of trading tools available to any trader. But do not get mislead with tools, trading with tools is amateur but trading with tools plus money management is professional.

My most favorite technical tools is 200 -simple moving average.Simple Moving average is a classic tool which makes millions to someone but also cost millions to anyone careless using this type of techniques.

To anyone not familiar with 200-moving average, it is simply an average of 200 time periods before. It then can be used as a trend indicator.

It is a reality that no one can predict the movement of stocks, or any broker or trading firm claims they found the holy grail in trading. It does not exist. But it is a reality MOST OF THE TIME (I do not say all the time), that once the price breaks full above a 200 moving average, it is starting sign of a long running bull market. And if a price breaks full below a 200 moving average, it is a sign of long running bear market.

Can we trade using it now? NO. You will lose a lot money, yeah I mean a lot. Define your risk first (money management). This is personal and depends on every person, I prefer to trade long term. The benefits? Prevent over trading which cost a lot of commissions, and you will able to trade with focus. While you have more time to do with other things you like, such as me blogging this article. (more…)

The success of stock trading online is all about money management. It is not about capital or the way you trade whether you a fundamentalist or technical, or how good your stock broker advices. The bottom line is: Money management

What is money management? It is a skill of trader to assess the risk and rewards of every trading decision or system. Investing in stocks has risk and there are also potential rewards. If there is no money management, there is no success in trading. Also trading without money management is Gambling and is not part of a trading career.

As an experienced trader, I will outline below the principles that I learn about money management:

Principle of Positive Expectancy:

Do not let me wrong, but success in trading depends on positive expectancy. What is “Positive Expectancy” ? Let me define what is “Expectancy” first.

“Expectancy” is the average amount you can expect to win (or lose) per dollar at risk. Mathematically:

Expectancy = (Probability of Win * Average Win) – (Probability of Loss * Average Loss)

Examine closely the formula if you are serious as a trader, it means that to have a profitable system, you should have a positive expectancy. This can be done by having high probability of win or high average win. (more…)