Trading stocks on-line can be fun and profitable. And it requires very little skill or experience. Here's how to get started.
You need a computer with high-speed internet. Next, you need $25,000 to open a day trading account with an on-line broker. Check with your broker about the amount needed for day trading.
If you have less than $25,000 to invest, you can still use the principles outlined here. You may not be able to buy and sell stocks within the same day, however.
Most on-line brokers charge between $5 and $10 per trade. Therefore, you can trade often without spending all of your profits on commissions.
Pick a stock with high daily volatility. Anadarko Petroleum is a good example. You can expect 200 points difference between the high and low price of this stock nearly every day.
A $50 oil stock usually varies 100 points from its high to low price during a trading day. A $100 stock usually has 200 points daily differential.
Now, you are ready to buy 200 shares of Anadarko, symbol APC. The price of this stock ranged from $113.95 per share April 19, 2006, to $93.51 May 24. So, it has the required volatility.
What should you pay? Buying at the stock's opening price of any given day is a good way to go. Or, set your price at the previous day's close. At some time during the day, most stocks cross their day's opening price or the previous day's close. Your trading program will allow you to set a specific limit price. If you want to avoid suspense,simply buy at market.
If you select Anadarko, you can expect to make $400 per trade with 200 shares. Set your selling price at $415 more than you paid for the 200 shares of stock. This gives you $400 profit and covers your buy and sell commissions.
Say your buy commission is $7, and the sell commission is about $7.31. Thus, $15 covers the buy and sell commissions. And you end up with a profit of $400 per trade. This can happen in a single day.
Here's the math: Suppose you pay $100 per share for 200 shares of APC, your cost is $20,000. To determine your selling price, add $15 to cover commissions both ways plus the $400 profit you want. This amount is $20,415. Dividing this figure by 200 gives your selling price of $102.08 per share. Place your sell order immediately after buying.
Keep playing this game after each completed buy and sell and expect to make $400 on each round trade. Ten trades like this gives you $4,000 profit on $20,000 invested. This can happen in 10 trading days.
You do not need to watch the price of your stock all day long. Set your orders after the market closes in the evening or before it opens in the morning. Go about your work or whatever you need to do. Your computer will make the trades for you.
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