Stock Trading

So you want to be a stock trader? You’ve heard about a friend of a friend who has made millions trading the market. Or maybe you have heard of a trader who works for 1 hour every day, making thousands of dollars and now you’re itching to become part of that club.

Before I go on, it is possible to make large sums of money in the market. However, if you show the market the respect of a slot machine, you will surely lose your money and lose it fast. There are very few who can trade stock for a living; it requires an extremely high level of discipline, skill, and mental strength. Stock trading is a game of odds and it is your job to put the odds in your favor. Before you go any further, accept the fact that the stock market is a random machine; drop your ego at the door and accept the message of the market, rather than the other way around.

It also sounds far more glamorous than it actually is. In reality, stock trading is a very mundane job, if you do it the right way. Good traders don’t place stock trades for the sake of trading. They don’t find a reason to buy a stock if it isn’t there. They will patiently wait for the trade to develop and come to them. That is key, patience. If you do not have it, you will find that being a stock trader is a very difficult proposition.

Let’s cover a few components that any stock trading strategy should consider.

Type of Trader

Are you a technical or fundamental trader? Or, do you prescribe to both? Technical stock trading takes time and dedication to become effective; however, once learned, it can be very effective in helping you identify opportune times for buying and selling. Fundamental traders are longer term investors who are only concerned with the analysis of a company’s financial position and future prospects.

At, we have all the tools you need to get started with your education in technical analysis, day trading, and even fundamental analysis.

Market Capitalization

Another important concept to consider is market cap. The size of a company will affect every type of trader. For day traders, many brokerage houses will limit your available day trading buying power if you trade stock in risky, volatile small cap stocks. Be careful, especially if you plan to hold these overnight; your buying power in the next trading session will be affected. Additionally, the big money does not dedicate large amounts of capital to trade stock in small cap companies; therefore, the large caps will see the most reliable profit opportunities in early morning trading.

Asset Diversification

Don’t put all your eggs in one basket. I’m sure you have heard this before and it is a very true statement. Diversify your assets between stocks, commodities, bonds, and currency if you are inclined. With the advent of ETF stock trading, it has become very easy to gain this form of exposure through the stock market.

Money Management

No matter what type of stock trader you are or what timeframe you trade on or what strategy you use, money management is the most important aspect of any stock trading plan. Never enter a position without having a plan for getting out, whether it is from a profit point of view or a loss point of view. Stop loss orders should always be entered to protect your capital.

Another cardinal sin in my book is buying more when the stock goes down. Let’s think about this. You have bought a stock and it goes down and you now want to buy more because you think it is a bargain? Be careful with this approach. You can lose a lot of money and get your hands bloody when you try and catch a falling knife. The banking sector collapse in 2008 and the internet collapse in 2000 were great examples of this.

Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...
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