Stock Trading Basics

Stock trading basics form the foundations of stock trading success. Here are a few stock trading basics which will serve you well.

One of most important things that any trader or investor must realize is that there is always risk. Every trader's objective is to maximize return on investment, while at the same time minimizing the exposure to risk. This does not mean that it is imperative that you focus on creating the perfect stock trading system. Far too many traders get absorbed in “paralysis by analysis” and end up becoming outstanding at stock market research without making any money in trading. To summarize this section, yes, controlling your risk is ultimately important. Trying to create a stock trading strategy with no risk is not nearly as important as creating a consistently profitable system.

Next up in our roster stock trading basics is one of the most difficult things for traders to do and that is to be patient. Patience is the hallmark of a successful trader. It is true stock trading can be very exhilarating and deliver an adrenaline rush like no other. Make sure you don't become a stock trading adrenaline junkie and get hooked on the thrills rather than the profits. With a good stock trading plan, trading system, discipline, time, and adequate working capital you can be a profitable stock trader.

It should go without saying that you should have a plan. We can start discussing the numbers of people who have failed in trading stock that do not have a plan, but we won't dwell on that today. You can start your plan by asking yourself one very simple question, “why do I want to trade stock?” If you can't answer that question then don't trade stock until you can answer that question.

The last entry in our exploration of stock trading basics is about trading discipline. We know that this sounds like a complete foreign concept to those who have not traded. To those who have traded you understand that when there is real money at risk being involved in the markets can make you anxious, nervous, lose sleep, emotional, and any combination of the above. Emotion is tied to money because emotion is tied to the loss of money. This is completely natural for most everyone who starts stock trading. Finding a way to minimize emotions and maintain trading discipline should be high on your list of priorities. One such thing that seems to be universal among successful stock traders is the use of an effective stock trading system. The use of a trading system frees the trader from having to make emotional or last-minute or shoot from the hip decisions. It is for this reason that having an effective stock trading system should be a permanent entry in your list of stock trading basics.