Online Stock Trading Tips

Investing in stocks is one of the best forms of investment available to any savvy investor. It is because it has a substantially higher annual rate of return compared to a bank time deposit or even treasury bonds.

Yet, only a few individuals really have it takes to invest in stocks. Some are not deserving, the unprepared one who takes the challenge to win stocks, and end up losing everything. They treat stocks like gambling. It is sad to say that betting in stocks is not the same as betting in gambling.

So what do you need to become a trader? How can you further increase your income by investing some of your money in stocks? I will write a few guidelines of what is possible but this depends on your country or location. But the guide will be a more general.

First, investing in stocks requires you to become educated and fully knowledgeable about stock investing process. You should know what is “buy”, “short” orders, the price, shares, investigating company background as well as knowledgeable in researching good stocks. (more…)

Maximum drawdown is the maximum number of consecutive losses in trading. If you ignore drawdown in your existing trading system, it can contribute some massive losses in terms of financial trading capital. It is always important to have some data pertaining to the maximum possible drawdown of your trading system. One of the applications could be to compute the maximum risk you can trade.

Example number 1: You have a trading capital of around $2000 and you have a maximum drawdown of around 10 consecutive losses. And your trading account requires you to have a minimum of $500 trading capital in order to continue trading. Now if you risk around $175 per trade. Then what happens if you encounter your worst trading drawdown?

Total losses due to consecutive drawdown (commissions not included)= $175 x 10 =$1750, therefore the money left in your account will be:

Money left = $2000 – $1750 = $250

The money left will not allow you to continue trading. (more…)