The ease of online stock trading draws the attention of new investors and investors looking for an alternative to the old methods of trading. With little more than an account and a mouse fortunes can be made or lost from the privacy of one’s own home. However, before getting carried away, investors should look into the basics of stock trading strategies to help protect themselves from what can be a very tempting albeit confusing world of internet stocks.
The only consistent notion about stocks is that they are inconsistent. Investors that make decisions based entirely on emotional “gut feelings” or make decisions based on desperation will only do about as well as they will at the casino. Planned, precise, and well thought out decisions make for strong trades. Online stock trading need not be a random roll of the dice.
Regardless of any pre-planned strategy that an online investor approaches the online trading world with, there are two basic entities that need to built into any strategy. All trading is based on maximizing the profits while minimizing the risks. These two factors also tend to cancel each other out. The greatest risks usually turn the greatest profits while the smallest risks typically turn tiny but long term profits. This means that an individual investor needs to find their individual risk tolerance while building their strategy.
There will be losses. There’s no strategy in the world that can guarantee online stock trading without loss. Loss is part of the game no matter how serious the player. The most successful online stock traders in the world have one basic rule implemented into their trading strategy. They all have their stock portfolio divided into percentages. They have a predetermined percentage seeking high risk, high return stocks, a predetermined percentage seeking medium risk, medium return stocks, and a predetermined percentage seeking low risk, low return stocks. The predetermined percentages vary from investor to investor and some have the bulk of their percentages in low risk while others have the bulk in medium risk. Placing the bulk of the available funds in high risk stocks is a sign of either gambling or desperation, neither one is considered a very sound strategy.
The reason that these percentages are predetermined for the vast majority of successful online investors is to help maintain unemotional investing. If there is a set amount of the available funds doing predetermined job, then the emotional windfalls and shortcomings are incapable of moving the percentages around. Online stock trading can become emotional, and when it does online traders start making bad decisions based on their emotions. Keeping the emotional trading to a nonexistent minimum is very difficult for many online traders, but it is also on of the best laid online stock trading strategies there is.