This Type of Trading Could Make You a Million Dollars
Investing in the equity market is how I’ve made my fortune …
While I was able to turn my $12,415 bar mitzvah money into millions, it didn’t happen overnight.
I learned the rules of the market and I was obsessive about learning what patterns could help me decide on the trades with the most potential.
I wasn’t right all of the time, but enough of the time to be profitable. Over the years, I’ve learned a thing or two about investing in the equity market.
Maybe best of all, I found my methods to be effective during both bull and bear markets, which is essential for a trading career. The market is ever-changing, and it’s important to use techniques that can adapt with the market. After all, it’s hard to know what to do sometimes.
Here are some of my equity trading tips:
Choose the Right Broker
To execute trades, you’ll need a brokerage account. But don’t just go with the first one you Google.
This is who you’re using to execute your trades, so it’s important to choose a good broker. After all, you probably wouldn’t open an account with a bank without first checking their policies on overdraft fees, minimum deposits, and so on, right? Right.
So you need to do similar due diligence with potential brokers. You don’t want to be surprised later on by yearly fees, closing fees, or percentages taken out of transactions that are higher than you thought.
Take the time to research different brokers. Ask around with other traders, read reviews, and look at the broker’s website to view their policies. After you’ve considered a variety of sources, make your decision. Remember: The right broker for another trader might not be right for you.
Use Stop Orders
Stops, whether executed as orders or as mental stops, are essential for equity trading. Trading is a mental game as much as a numbers game, and stops help keep you in check.
A stop order is an order type where you specify that you want to buy or sell a stock when it reaches a specific price, which is called the stop price. Once this price has been reached, your stop order is automatically executed as a market order.
If you’re buying, it’s called a buy stop order, and it’s executed when the stop price exceeds that current market price. If you’re selling, it’s called a sell stop order, and it’s executed when the stop price dips below the current market price.
Related to the stop order is the trailing stop order, which is also designed to help protect you from losses. But instead of a specific price, it specifies a specific percentage away from the stock’s current market price.
The trailing stop offers a little more flexibility than the fixed stop order which needs to be manually reset. The trailing stop can help you specify how much you’re willing to lose, but doesn’t put a limit on how much you can profit.
The stop order can be advantageous if you don’t think you will be by your computer but you want to lock yourself into a trade in which you see a lot of potential. It can also help you protect your assets) if you’re worried about losing money.
A mental stop is a similar approach, but without executing the order specifically as a stop order. Instead, you make a mental decision and pinkie-swear yourself that you’ll only enter or exit a trade at these specific prices that you’ve set.
Trouble is, mental stops can be easier to break, because like I said, traders get emotional. You have to have a lot of willpower to stick with it and not let your ego get in the way.
Practice Before You Start Investing
Few traders are ready to jump right in and wager money on trades right away. Approach the market cautiously and practice before you trade, otherwise you could lose money and become discouraged.
Paper trading, or simulated trading, can be a great way to get used to the mechanics of executing orders and testing out your theories for trades and getting the lay of the land. The look and feel of paper trading platforms is practically identical to an actual trading interface, but you’re not risking real money.
Where’s the fun in that, you ask? Well, it’s not about fun — it’s about preserving your capital! Paper trading can help you get up to speed on the logistics of trading so that you don’t make dumbass mistakes when you actually start spending money.
It’s much easier to deal with making mistakes in faux trades than actual trades with your money.
The Bottom Line
Equity trading allows companies and investors to potentially profit, which is vital to maintaining a healthy economy.
But that’s not the only benefit.
It also provides the opportunity for investors like you and me to profit from the fluctuations in the stock prices.
By gaining a better understanding of the mechanics of equity trading and the equity market, you can be better poised to take advantage of these opportunities as a trader.
When you gain this edge, you’ll likely have a better win rate, and are much more likely to build your account!
Editor, Penny Stock Millionaires