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How To Get Started Trading Stocks

The first thing you will need to do, if you want to know how to get started trading stocks, is to deposit money in a brokerage account. You can choose to have a broker find stocks for you to invest in, or you can do it yourself.

In my experience, brokers have their own interests at heart and not yours. They want you to make lots of trades so they can make lots of commissions. Typically they will find many stocks for you and have you switching all the time, collecting fees up to $250 on each trade.

Open A Discount Brokerage Account

A much better way to trade is to open an account with a discount broker. They typically charge $10 or less to make a trade, but you have to find your own stocks to trade. Here is my online broker review of the three most popular discount brokers. I suggest you set up an account with one of them or a similar type of broker.

Once you have your brokerage account set up, you will be ready to trade. The problem here lies in WHAT to trade. There are so many investment vehicles out there it can be quite confusing. Stocks, Bonds, ETF’s, Mutual Funds, Forex, Futures, Options, Commodities, and more.

Decide Your Risk Tolerance

What you want to put your money in is whatever vehicle will outperform the markets. So it’s all about RETURNS! Big returns mean big risk. No risk, very little if any return. So you need to decide how much risk you are willing to accept for the return received. What makes you comfortable to sleep at night?

Typically, an acceptable risk is 1/2 your potential annual gain. For example, if a mutual fund has been returning 20% annually, you should be willing to lose 10% of your portfolio without stressing. If you want 100% annual return, be prepared for drops of 50% in your portfolio.

Decide Your Investing Goal

The next question you must ask yourself is, “what is my goal?”. Are you trading/investing for growth or for income? These will require different trading strategies. If you are investing for growth, you can take on more risk and shoot for higher returns. If you are investing for income, you need a more safer and consistent income.

Income is typically generated by buying and holding a stock that pays dividends. If you buy the stock on margin (your broker will match what you invest) you can effectively double your return. Dividends are paid quarterly. If you also sell options against your stock every quarter and generate even more income. 25% annually is rather routine.

Determine the Direction Of The Markets

The next thing you will need to learn is to how to tell if the markets are going up or going down. The direction of the markets will determine what you should be investing in. If you know the markets will rally you can go long. Your are betting stocks will go up. If you know the markets are about to crash, going to cash or buying Contra-ETF’s is a smart move.

Timing the markets is crucial to your success as an investor. Unfortunately it is the hardest thing to master. This is why I developed my proprietary Market Timing Indicators. They monitor the markets 24/7 and send emails to my subscribers and I whenever a shift in the market is about to occur. These shifts occur every 2 to 4 weeks and offer great money making opportunities.

What To Buy

I don’t have time to go into the pros and cons of all investment vehicles, so I will stick with the topic of stocks, mutual funds, and ETF’s. These can easily be bought and sold through any discount broker. Other investment vehicles are for more advanced traders and you should only try them once you have an understanding of the basics.

Remember what I said before, when it comes to growth, focus on returns. So how do you tell if a Mutual Fund, ETF, or stock is a good investment for growth? In the simplest terms, you simply compare its returns to that of a benchmark. The benchmark I use is the S&P 500. This index represents 500 stocks and gives a more reliable outlook on the broader market. If your investment vehicle is beating the benchmark, its worth consideration.

On average the stock market rises 11% per year. If we are in a bull market at the time you are reading this, you could invest in SPXL or UPRO and you should average 30% annually. If you found an investment that returns more than 30% annually, even better. If the markets are crashing when you read this, SPXU or SPXS would make a good investment.

How To Get Started Trading Stocks

Mutual Funds are probably the best way for a beginner to invest while he/she educates themselves on stock picking.

Go to a “Mutual Fund Screener” (usually your discount broker provides this with your account or you can Google one online) and check out the 1-year, 3-year and 5-year return of the Mutual Funds. Compare that against those of the S&P 500. Did any of those beat the markets in all three-time periods? If so, that would be a good place to invest your funds for now.

If you want to “earn while you learn”, I’ve compiled a few FREE trading strategies that you can use right now. I’ve personally used these with success in the past. Simply follow the directions. Most of these only work in a BULL market.

If you are really lazy, but want gains now, subscribe to my Index Trading System. If you can read an email you can do this. I’ll send an email (about 2x a month) and inform you what to buy, when to buy, and when to sell. You get the email, you place the trade. Fastest and laziest way I know to get BIG returns.
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