Trading Stocks Doesn’t Have To Be A ‘Suckers Bet’ – How To Earn Money Trading Stocks


There are actually only a few investors who are constantly successful in trading stocks. This can be pinpointed to just a few factors that directly influences either the success or failure of the majority of stock investors. If you want to make some money or even make a lot, there are several steps that you can follow.

Step For Successful Stock Trading
First and perhaps the most important step for any stock investor is disciplined money management. Since you will be dabbling with your own hard earned capital in a ‘zero-sum’ game of chance, you need to manage your money well, or you will go broke. This first step is not about picking the right stock, or getting a ‘hot’ tip, its about your personal discipline. The trading funds allocated, either small or large, should be meticulously managed effectively. The most successful traders have a rock-solid method to ensure they make money in stock speculation, and they all swear it’s money management. Without it, the results of your trading will be fair to bad, and you may fall in the category of those who lost their shirt in the stock market.

For successful stock trading, you must first determine the trading account size. It has to be risk capital, meaning your present lifestyle will not be affected if you lose that money, so it can’t be the cash that puts food on the table. Also, is the trading system or ‘stock tips’ profitable? How much of risk is there for every trade or share?

The size of your initial account investment obviously determines how long you can play/stay in the stock market. Advanced investors do not need a large investment as they are already armed with enough knowledge and experience on how to trade wisely, and not make novice mistakes. Although it is possible to start trading in the stock market with a small or limited amount of investment, you however need to know how to efficiently control the risks involved. You have to make sure that the ‘risk value’, the money that you are willing to lose if the stock goes bad, to no lower than 3% for every single trade you make, regardless of how good the stock looks.

For Example:
If you have an account of say $10,000, then your loss per trade should be $300 or lower. Even if your account grows, you will still need to be disciplined enough to maintain that risk ratio of 3%. By following this seemingly simple rule, you will minimize your loses. When you start winning your trades, the ‘risk ratio or risk value’ of course will grow, as the money is compounded.

The stock trading system you’re using should obviously be reliable and profitable over the long run, as you will not win every trade or lose huge amounts of money. You must be able to estimate the systems profit potential, known as the ‘edge’, and if you are able to reach the estimated, target amounts over time. If so, then your trading system is a profitable one. The system should have a built in, predetermined ‘target’ profit, so you will know beforehand, where you will enter the trade and where you will exit the trade. By using correct orders, you’ll win more trades and be more profitable.

The trading system is of paramount importance. Whenever you enter a trade for a certain stock, the risk should always be low. Your trading account should continue to grow, if you know and can determine where to enter and exit the trade. You must follow that trading plan to a ‘T’, which has a set of trading rules, and you must abide strictly to those rules.

It’s also vital to learn which stocks will move properly to your advantage. Every stock investor develops a game plan or trading style or pattern, and you should have one as well. When you are just starting out, you shouldn’t be too hasty or eager in making numerous trades. Take your time and get familiar with how the current market is behaving. You will need to study each and every slight detail. Having a good stock broker is also important as he/she will be your guide, your ‘eyes and ears’ on how to start the trading process.

If you want to earn money trading stocks, money management is the first primary step, you must also have a good reliable trading system, and you should have a set of ‘checklist’ rules before pulling the trade trigger. Technically, stock trading is not really that difficult to understand, but you should learn the basics as well some advanced methods to ensure continued success. Take your time to analyze how the stock market is behaving. Learn from the experts and what previous mistakes they’ve made. That way, you can slowly but surely gain confidence and success in your investing future.

Morningstar Stock Fund Investment Research

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