Trading Basics for Beginners
- Avoid Penny Stocks: Stocks between .0001 and $1.00 are high risk. They go up fast and come down even faster. If you're going to spend you day trading stocks I understand trying to make a few bucks on a penny stock. However, if you plan on keeping your day job, you should definitely avoid penny stocks.
- Hold for at least 3 months: Choose a company because it's a solid company that earns money such as Google or Ford. "Earnings" come out once every 3 months to show how much a company makes.
- Don't jump on the bandwagon: Don't buy a stock just because it's popular. Research the company and come up with your own decision as to how much of your money is worth investing into it. "Hoping" a stock will go up is not the correct approach to investing long term in strong companies.
- Would you tell your friends about the stock you just bought?: If you fear negative feedback from friends then you're telling yourself that you're taking on a big risk. Think about it first.
- Is this company growing?: Do you think Google, Ford and McDonalds will be around in 10 years? What about the 3 random XYZ companies for .25/share that promise to be at $1.00/share in a week? The only way penny stocks double and triple are when popular news goes viral, but when it comes time to crunch the numbers you'll see that the company isn't worth $1.00/share. It's called stock pumping.