Free Online Trading Tips

Stock trading and currency trading are among the profitable businesses you can engage in if you want to earn extra money online or offline. In fact, investing on these trading ventures is like making your money work for you. If you are interested in making money in trading, here are free trading tips that you might find useful.

Indeed, stock trading can be a profitable business, and in fact, many people quit their nine to five job just to make stock trading a full time moneymaking venture. However, it is essential to learn everything you need to learn if you want to venture into this business of trading stocks.

Before quitting your day job and investing your hard-earned money in stock trading, keep in mind that successful stock trading entails a lot of preparation. You have to be debt-free if you want to make money trading stocks. You must also have enough capital and equipped with a working trading strategy and money management skills to be able to face the risks that you will encounter in trading stocks.

Keep in mind too that trading stocks is a risky business and that, one thing that you need to prepare if you want to venture into trading is to prepare to lose. Losing is inevitable in trading, and thus you have to accept the fact that you will get your share of losses at one time or another. Of course, like any other business ventures, you have to prepare as well to make sure that you are not losing more than what you are winning.

To attain that, you have to learn how to read and analyze charts. These will help you identify trends that allow you to make wise trading decisions as well. The more skilled you are in reading and analyzing charts and some other technical trading tools, the more you will succeed in minimizing loses and maximizing profits.

Make sure you know how to manage your money. Money management is important if you want to trade stocks and make profit. Allot a certain amount that you are willing to invest in stock trading and make sure to monitor your losses and profits. Learn from your losses so you will efficiently know how to manage it. Learn as well on the times of our biggest profits so you can also develop a good technique and trading strategy.

Find a good quality, reliable and professional broker. This is one of the free trading tips you can always get from experienced traders. Whether you want to trade stocks online or offline, getting yourself a trading service that has already a proven track record in stock trading helps a lot in your quest to make more profits in trading stocks. Compare brokers and especially if you are trading online, a wise choice of broker would make a big difference in your moneymaking. Check out their backgrounds and research. It is always important to make sure that your investment is safe always.

Also make sure that your broker has the right tools and trading system that can bring you success in sock trading and be sure always that he is someone who can effectively guide your through the trading process.

Market Timing, Risk and Profit

There is a correlation between market timing, risk and profits.

The better you are at timing your trades, the lower your risk exposure and the higher your profit potential.

For example, suppose that the market (pick any) has made a bottom at 100 and eventually tops out at 300.

And suppose that you use a protective stop-loss (recommended) every time you enter a trade.

When buying into a market, you normally place your initial stop-loss just below the low of the day you enter long.

So which would provide you with less risk exposure?

A. Buying at 145 with a stop-loss at 99, or...

B. Buying at 115 with a stop-loss at 99.

The correct answer of course would be 'B', as this would give you an initial risk exposure of 16 points as opposed to 46 points.

What is the difference between the two entries?

The difference is that with better market timing the trader is able to enter closer to the bottom with option 'B' and therefore has less risk exposure to deal with.

In addition, because of getting in closer to the bottom of the market, this allows for more upside (profit) potential as well.

By entering at 115 rather than 145, there is an additional 30 points available for the trade.

Naturally this example is extremely simplified, and this article is not about buying the very bottom or selling the very top of any given trend.

The example is only to illustrate that the better your market timing happens to be, the less risk exposure you will have and the higher potential for profit.

Understanding this should prompt the trader to devote a good amount of time and energy towards enhancing his or her market timing skills and resources.

Traders need to be good at timing to go along with other important facets of successful trading, such as good money-management, good risk-management, overcoming fear and greed, trading with the momentum and trend, etc.

There are many available tools and resources to help traders become better market timers. The key is to test and determine which is better for you and your goals.

As a trader of 30 years now, I have spent three decades honing my timing skills. Spotting when the market is most likely going to make bottom or top is much easier today than it was years ago due to accumulated knowledge and practice. When I talk about market timing, I am talking from a wealth of personal experience.

Anyone can improve their market timing skills without having to invest a great amount of money, but some time is required. The more time invested the better you will get.

So allow me to point you in the right direction.

Avoid the fundamentals as your main resource for market timing. News and rumors have little value if any.

As for Government reports, they have value as to 'when' they are released more than what they contain.

The reason for this is that, depending on the level of importance certain reports have on certain markets, the markets often will react to their release.

However, the direction a market moves based on what a report says can often be contrary to how it acted to a similar report previously.

Technical Analysis is the best approach to market timing. This is not limited to technical indicators.

Other valuable technical approaches fall under esoteric areas of analysis, such as seasonals, Gann analysis, Cycle Analysis, market geometry, etc.

Be open minded as you embark on learning ways to time the markets better. Do not dismiss something just because it is not commonly used by the majority.

An Intraday Trading System

20 years ago, before markets became completely computerized, traders worked off the floor and markets were slower and less efficient. In those days, intraday trading systems could take advantage of those inefficiencies to find a profitable edge. It wasn't easy but it was a lot easier than it is now.

Today, markets are controlled by computers and algorithms. HFT (high frequency trading) contributes to at least 40% of market transactions in some markets and even more in some other markets. Non-HFT algorithms make up a big percentage of the rest.

And the dominant players in HFT and algorithmic trading are big hedge funds and institutions; companies like Goldman Sachs that has huge pools of wealth and resources. Competing against these financial giants for the most part is foolhardy.

Teeing off with Norman

It's like Howard Bandy once said: "trading against Goldman Sachs is like going for a round of golf with Greg Norman. You're never going to win so there's no point in trying." Or something like that.

Consider also, that there are very few examples of anyone even being able to beat the market on an intraday timeframe. And even fewer who have been able to do so with a system.

Still not convinced?

So it's clear that intraday trading is not for the faint of heart and I should know as I spent almost a year trying to time the markets every day in a professional setting.

Even for professionals, intraday trading is supremely difficult and expensive. When I worked as a day trader, we may have had direct access to the market but we also had to pay £150 a day in desk fees, which very quickly mounts up unless you are trading very large size.

But what if you want to ignore these warnings and you're still determined to build an intraday trading system?

I can only wish you the best of luck and suggest the following pointers that come from my own trading experience:

- Avoid forex, there appear to be more inefficiencies in individual stocks and futures.

- Think outside the box. For example, look into social trading, look at the smaller markets that the banks aren't as interested in.

- You can override the system. Longer term systems may not benefit from overriding but there are studies to suggest that humans and machines perform better when working in unison. In fact, in the short-term, discretionary trading usually does better than system trading.

- Conquer the psychological side so as to avoid gambling and emotional stress.

- Understand how to analyze your system so you know when it's stopped working.

Master some of those rules and you'll have a much better chance of making money from an intraday trading system.