4 Tips To Keep In Mind When Trading Stocks

The stock market can be a terrific way to make a great deal of money over time if you know what you are doing. At the same time, it can be a horrific way to lose money fast if you are not careful. Here are four tips to keep in mind when trading stocks.

1. The number one thing to keep in mind if you are new to trading stocks is to start small and work your way up. The last thing you want is to jump into a shark tank unprepared and lose thousands of dollars. Start with low lots of shares such as 100 as this is much easier to take in if the shares go against you.

2. The next tip is to be cautious of trades during a consolidation. This can be identified by flat or nearly flat 5 and 15 period moving averages. Instead, make trades when the stock is in a trend of higher his and higher lows for an uptrend or lower highs and lower lows for a downtrend.

3. It is absolutely vital you know where your exit points in the trade will be. Never allow yourself to stay in the game and continue to lose more and more. Before even getting into the stock market, you need to have a plan and understand where your stop loss value is. Know when to take losses and move on so that you can continue to play the market.

4. A gap is defined by the opening of the bar being greater or less than the close of the previous bar. Therefore, if a stock closed at $100 yesterday and opened at $103 today, it has gapped up by $3. What you want to do is watch out for stocks that have a significant gap at the open regardless of whether it is up or down. Stocks that have gapped are more than likely going to have good volume and swings in price, thus indicating good trading opportunities.