Online Stock Trading Tips

This is a tutorial on how to use MS Excel to back test your trading strategy and see if it is feasible to use or not. This tutorial assumes you are going to use the trading system on a daily basis. So if you are going to use it on a monthly basis, then you will need to do minor modification on the spreadsheet.

Backtesting is important to assess the expectancy of your trading system. You can read more about trading system expectancy on the principles of money management in stock trading.

If your trading expectancy is above $0 dollar including commissions then you can be sure that it will profitable when you are going to trade it using real money.

The following are the steps you are going to do:

Step1: Go to Yahoo finance: http://finance.yahoo.com/ and then under “Get Quotes” type the code name of the stock you need to analyze. For example, let’s use the Google stocks: GOOG (more…)

One of the popular methods of long term investment in stocks is the dollar cost averaging method. If you will invest your money using dollar cost averaging, you will be required to make installments at a certain amount and at a fix time period (example monthly).

For example, supposing I have $50000 to invest in stocks. If you are NOT using dollar cost averaging (so you are using lump sump method), you will simply invest the entire amount in a single transaction and let it stay there for a couple of years (25 months maybe) then reap profits after that.

Using dollar cost averaging, you will break down the $50,000 into several payments at a fix time interval usually monthly. Supposing I will commit to invest $2000 a month for stock X then it will take:

$50000/ $2000 = 25 months for the dollar cost averaging investment to mature.

Dollar cost averaging requires you to invest a FIXE D amount of dollars in a periodic interval (for example $2000 per month).Since the amount of investment is fixed and the stock price will vary (high or low); you will be purchasing more shares if the price is cheap and small amount of shares if the stock price is expensive. (more…)