Once you know where the economy is in its business cycle, you can start to look for a trade. It's best to have some kind of system in place that will be used before EVERY trade. Here is a simple five-step plan to help you get started.
How to Invest Online in 5 Steps:
- Find a stock
This is the most important and hardest step in trading stocks. With more than 10,000 stocks to trade, the time of year is a good rule of thumb. For example, as I write this, spring has just started. It would make sense to look at stocks that tend to go up, or down if you are a bear, at this time of year.
- Fundamental Analysis
Many short-term traders may not think it's important to do ANY fundamental analysis, but it is important to know the stock's chart patterns from the past and the news about it. One example is when people get paid. If you are making plans,
If a stock has missed its earnings goal for the last three quarters, it might not be a good idea to play it up.
- Analysis of how it works
Indicators come into play at this point. Stochastics, MACD, volume, moving averages, RSI, CCI, levels of support and resistance, and everything else. Whether you choose leading or lagging indicators may depend on where you go to school.
When you first start out, keep things simple. Using too many indicators is a sure way to lose a lot of money. Start by getting very good at using one or two indicators. Learn how they work, and you'll be able to trade better.
- Go with your choices
Once you've bought a few stocks, you should know how to take care of them. If the trade is meant to be short-term, keep a close eye on it to see when you should get out. If it's a swing trade, look for signs that the trend is about to change. If it's a long-term trade, make sure to check on the stock once a week or once a month.
Use this time to keep up with the news, figure out your price goals, set stop-loss levels, and keep an eye out for other stocks you might want to buy.
- What's at stake
As the saying goes, the tide moves all ships up and down. If you know which areas are hot, the odds are in your favour.
For example, if you are long on an oil stock, which means you expect the price to go up, and most of the oil sector is going up, you are probably on the right side of the trade. Several trading platforms will give you access to information about the whole market so you can learn what you need to know.
