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Share trading
Dynamic share trading techniques
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Position yourself in the market
If you are trading from home, try to set up a dedicated office, with telephone, computer and any other screens. Keep filing facilities, newspapers and other reading matter to hand.
| Keep your eye on the financial web sites
Watch financial news flow as world events will affect your trading decisions. Coverage is available on web sites such as
Ample. On some of these sites, you can also place your trades, as well as build and watch your portfolio. You will have access to fundamental research, charts and message boards.
For the most up-to-date news coverage, use a Reuters or Bloomberg terminal. These are not cheap to access, but are the best options for dedicated traders.
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Choose a suitable broker
Most online brokers are browser-based. They allow you to execute a trade yourself, rather than asking the broker to do it for you. When internet traffic is heavy, these brokers can be too slow.
Active trader brokers enable you to deal faster, saving you a fortune in the long run. They provide software to load onto your personal computer.
Place your order
As a trader using a browser-based broker, it is a good idea to use a limit order when you buy or sell shares online. This is where you specify the maximum price at which you will deal, failing which the deal will be shelved.
Limit orders make sense as you will be exploiting sometimes small price changes, and so cannot afford to risk the price turning against you. This is less important if you are using an active trader broker where you can trade faster.
Profitable share trading is harder than it appears
Whichever way, you will need significant returns on share trading to make it worthwhile. You must overcome the spread, and, on purchases, stamp duty. In a seven-month study, the North American Securities Association found that 70% of day traders lose money.
Develop your own share trading system
Share trading is a game, and money is the way you keep the score. The way to succeed is to develop a system that works for you.
Once you have a system in place, fine-tune it. Do not abandon it to suit particular trading circumstances.
Don't become a workaholic trader
When you find that you are not concentrating on the market, and are missing out on potential gains, take time out. Even if it is just for a day or two, you will come back to your work refreshed.
Protect your trading capital
Only trade with capital that you can afford to lose. The warning is particularly applicable if you are approaching retirement age. Do not at this point trade with your life savings.
Diversify your risk
Do not invest more than 15% of your capital on any single share trade. Also, do not expose more than 25% of your entire trading capital to losses.
If in doubt, stay out
If you are having a run of unsuccessful trades, stop. As share trader William Gann, wrote in How to Make Profits in Commodities: "When you make one to three trades that show losses, whether they be large or small, something is wrong with you and not the market. Your trend may have changed. My rule is to get out and wait. Study the reason for your losses."
The next step
For more on online stock market trading, order Everyone's Guide to Online Stock Market Investing by Alexander Davidson, published by Kogan Page. This is a must read before you start (or continue) trading shares.
For a gentler introduction to share trading, order How
to Win in a Volatile Stock Market by Alexander Davidson, published by Kogan Page.
To find out how professional share traders make fortunes, order Stock Market Rollercoaster, by Alexander Davidson, published by Kogan Page.
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