For illustration purposes, lets assume I have just invited you over for dinner. Assuming you accepted the invitation, one of the first questions your would ask is “How do I get there? “ The same applies to beginner investors. Every investor was at one time a beginner investor. The investors who reach the finish line with a nest egg had a plan to get there.

Lets get back to dinner. I live in Florida. You live in California. That would not provide enough information for your arrival. You have a starting place and a destination, but what about the plan to get to dinner? You would need to know specifics. The same applies to investing. You would prepare for the journey, chart a course and arrive safely in Florida as you would with your investment goals.
The same principle applies to beginner stock market investing. Lets assume you have $10,000.00 to invest right now. So how do you prepare?

Understand How The Stock Market Works

Individual investors should start right here. What makes a stock price move? Hint: it is not individual investors. Institutional investors, such as mutual funds, and banks, move stock prices up and down. Simple supply and demand I the order of the day. Institutions make a living buying and selling stocks. Following along with how institutions trade is a good place to start. Understand your 1000 shares of XYZ are not going to move the stock price.

Defining Yourself as An Investor

My personal stop loss point is 6%. Why is that? Because I do not like the way it feels losing 10% or even 7%. This is a hard and fast rule for me. I remember following a stock once down to a 20% loss thinking all the while it would come back. It did not. The point is I know myself, and I know my rules. They are non-negotiable factors for me with investing in the stock market.

Where Are You Now As an Investor?

Every journey begins with a starting point. Every journey has a destination point. Everything you do in between will either define your success or document your failure. Set your goals; practice your strategy with paper trading stocks. Set aside capital for short term investing. Plan to include long-term investments. Open a money market account for safely keeping your cash. If you want to trade options, first learn how to trade options . Determine your plan and then work your plan. Dinner is at 6

Becky seemingly everyone wants to makes a living day trading. Can you tell us in reality, how hard is that to accomplish?

That is a hard question to answer. I would say that most people could not make a living day trading. You need to have a good understanding of the markets, their trends and how the markets and individual stocks react to news. You need to know what things to take into consideration (PE, float, volume, chart) before trading a stock.  It takes confidence in your research. You need to have the time to watch the financial news and your stock trades.

You need to know what your risk tolerance is and how you would handle the volatile moves in stock prices. It’s something that comes by trial and error it is something that is learned and it is not learned without risk of monetary loss. But if it is a passion and you have the time to read and learn and the money to risk, yes that type person can make a living day trading.

I did not go to college, have never studied finance or economics, I am a homemaker and a mother that makes money by day trading stocks online. I have been involved in the markets, trading stocks for the past 10 years not necessarily day trading. I had never shorted a stock until this past year. When a market is in a downtrend it is very hard to make money being long.

My thanks go out to theStreet.com and Jim Cramer for sponsoring the Beat the Street contest last year. I did well in the first game (42nd place) and then won their second game, it gave me the confidence to open a margin account and start day trading and shorting stocks.

How much money does a person need to start day trading?

You can open an account with two thousand dollars at Ameritrade (which I use) or
E-Trade. There are other online brokerages Scot trade only requires five hundred dollars to open an account. Keep in mind this type of account you would only be able to buy and sell. To be able to short stocks you would need to apply for a margin account, which requires quite a bit more money. At Ameritrade minimum to open a margin account is twenty-five thousand dollars. You would need to check with each brokerage house to get their requirements for a margin account.

How much time do you spend researching stocks to trade?

I spend approximately two to three hours after the market closes checking earnings reports. In this market I’m looking for missed EPS, Revenue, downside guidance for the next quarter or coming year. I take notes on everything so the next morning I remember what sector the company is in, what they do, how bad the miss was. Next I go research the stock for the PE, float, volume and look at the chart trend. I make notes on that, I read the news releases. If I have more than a few possibilities I narrow my choices to just two or three. In the morning I watch the volume and the amount of the gap down in pre-market and I watch the futures so I have an idea of what the market is going to do when it opens. I also have CNBC on all day.

Do you have a pre-determined exit strategy when you buy a stock?

If I buy or short a stock for a day trade and it moves enough that I make 150.00 to 300.00 I’m out. If it goes against me if it gets to a 20% loss I am out. If it goes against me and does not hit 20% I will watch the daily chart and volume, it will make a high or peak on the chart and go back down if it comes back up and breaks that peak I’m out.

Does your portfolio have long term investments?

Yes, I have long term investments. I think you should have a separate account for those investments. That way it’s easier to track how well you are doing with the day trading. If you have long term investments you have been losing money the past 10 months or so.

What is the number one number mistake a new day trader makes?

I can’t speak for other day traders, but a big mistake I made was to under estimate my risk tolerance and being greedy, holding out for just a little more. For example I shorted 5000 shares of XYZ at 5.88 per share the price goes to 5.80 (that’s a 380.00 profit after commissions), do I cover no I’m hoping for more, the price starts going up it passes the 5.88 I shorted at and I’m losing 50.00 every penny it moves I cover at 5.92 (a loss of 220.00 including commissions) and then it starts moving back down and had I held it I would have had a large profit. I have learned not to make such large trades and when I have a profit, take it.

Now for the last question I would like you to ask yourself a question that people would like to see answered. In other words if you were a new prospective day trader what would you want to know?  Stock picks not included.

Be sure to use limit orders not market orders!! When a stock is moving fast, you used a limit order, and it does not get filled, it is not usually a good idea to chase the stock. There is always tomorrow and a lot more stocks.

I would want someone to tell me to practice first, paper trade stocks. Find a stock that you want to trade, do all of the research. See if it moves like you thought it would. Write down the opening price, your price would be somewhere close to that. Decide to sell or cover, write the price down. See how well you do. I would say to practice for at least two to three months before risking your money. It is not an easy thing to do, and paper trading is way less stressful than when your real money is at risk!

The market reacts to every bit of economic news that’s hits the news wires. It always has it always will. Fortunes have been made off both positive and negative results. Are you a trader or an investor? Swing traders actually can flourish in markets like these. Their positions are usually tied to news, and enter and exit stocks on a short-term basis, from a few days to a few weeks. Swing traders watch for technical and fundamental analysis in determining their strategies, bent more towards technical signals.

However the investor uses a different tact. Their decisions are based on the fundamentals of the company. 90% of all stocks follow the market regardless of how good stock fundamentals are. This is where your own strategy comes into play. Determining who you are as an investor well in advance of trading the stock market is a key factor in determining your success as an investor.

We were recently asked a question. A woman stated she had lost 35% on paper with her investments recently. “What should I do?” We cannot answer that question for her, nor can anyone else. You will never be able to buy any stock at its absolute bottom, nor will you be able to determine the absolute top when selling. That’s simple fact is as much a part of investing in the stock market as any other rule you may apply.

Preservation of capital should be your number one priority with investing. Your pre-determined rules for trading stocks should be the rules you follow. The real question is do you have rules that you follow. Frankly most do not, and that is why most people lose money in a market correction.

When considering how much you should invest, one of the first questions you should ask yourself is how much can I afford to invest.  In your deliberations, you should consider factors we have discussed previously, like your current financial situation.

Are you making payments on high interest credit cards or other debts?  Do you have enough money to sustain you for at least three months should you meet with some unforeseen misfortune like a sudden medical illness or finding yourself unemployed?  Do you have a home or other responsibilities that may require some unexpected out of pocket expenses?  These are all things to take into consideration when you set out to determine how much you should to invest

Many first time investors or beginner investors often want to begin by investing their entire savings.  Although for some this may be an option and if it’s true for you, great!  However, you should consider your entire financial situation and keep your investments strategy in line with your long range financial goals.  Think about what your savings was originally for.  This may prompt you to reconsider a full investment from long standing savings.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have income or funds from another source, such as an inheritance, this will quite likely be all that you have available to invest.

Next, determine how much you will be able to add to your future investments. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time. Most employers offer 401K plans and other savings plans to assist their employees with meeting their financial goals for retirement.  You can also speak with a qualified financial planner who can assist you in setting up a budget and help you determine how much of your future income you should invest to meet your financial goals.

With the educated and knowledgeable assistance of a financial planner, you can be sure that you are not investing more than you can afford – or less than you should in order to achieve your specific investment goals.

As with many types of investments, you can be assured that a certain initial investment will be required.  Research the investments you plan to make and be armed with all the information you can obtain prior to investing your money.  If you don’t have the required initial investment amount, you may need to look for other investment options like best cd rates.  Beginning investors should never borrow money to invest.