How to Start Trading Stocks from Home and Avoid Big Loss?

How to Start Trading Stocks

If you have a computer, a reliable Internet connection and a set budget in mind, you are all set to start trading stocks from the comfort of your own home. However, before you begin do you actually know how to start trading stocks, analyze potential penny stocks lists and have an actual plan in place?

For budding penny stock investors it is essential to self-educate by at least reading a highly popular book on the subject Penny Stocks for Dummies by Peter Leeds or checking out some of the online publications by Timothy Sykes, a highly respected authority in the penny stocks trading world. Another route is getting a subscription to a trusted penny stock forum where you can gain an understanding which hot penny stocks lists are currently recommended and stay in touch with other fellow small-cap investors. Whatever route you choose your number one step in learning how to start trading stocks is self-education.

The second lesson on the subject on how to start trading stocks is to set a budget. Generally, no investor should go over their 5% portfolio budget maximum because small cap stocks are extremely volatile and risky investment. If you are ever tempted to go over the budget by a recommendation of top penny stock traders or friends, read the rule one more time to save yourself a nice chunk of money down the road.

Once you understand the basics of how to start trading stocks, now we can get down to the nitty gritty of it. Initially you need to figure out which brokerage firms to use. The most important factors to consider is to compare their account minimums, transaction fees and any other differences or similarities that may help or stand in the way of your trading. Some of the leading online brokerage firms are Ameritrade, Charles Schwabb and Scottrade. Most of the online brokers are pretty similar, however some platforms may be more user friendly for some new investors still learning on how to start trading stocks. Another no less important point to think about is their trading volumes. If you are just considering a casual penny stock trading versus high volume trading experienced investors undertake, you should pick an online penny stock brokerage firms accordingly. In this article Forbes provides a comprehensive analysis on how to pick a brokerage firm to match your specifications. According to the data, it looks like Choice Trade and Zecco are hands down the best options for newbie investors since they offer low transaction fees and no minimum account balance.

Once you start understanding on how to start trading stocks online, beware of the scams. If you ever receive an e-mail encouraging you to invest in a particular penny stock or watch an infomercial pumping you up to buy into some stocks, beware! These might be part of popular penny stock scam that target naïve investors into believing that they have just stumbled into the greatest stock of the lifetime. Only hard work analyzing each particular company and watching market trends is a sure answer on how to start trading stocks and avoid huge losses.

Another aspect of learning how to trade penny stocks online is to keep emotions at bay and never trust your gut or letting panic overtake you. By trading erratically without any plan or strategy in place, you are in for disastrous losses. Most experienced traders keep a detailed log of executed trades, stocks purchased, volumes and strategies used. By analyzing this data, each investor can start noticing successful patterns to repeat or strategies to stay away from.

The last but not least part of understanding how to start trading stocks is analyzing situation as a whole and not just individual penny stocks. An overall market situation, specifically whether it is a bull or bear market, will dictate the best investment strategies. In the bull market, when the prices of stocks are soaring and most investors are in a buying frenzy, it is worth remembering about avoiding emotional purchases. Buy only companies that are sold for the prices that they are worth or lower. The bear market, on the other hand, with majority of stock market heading in a downward spiral, is a great time to buy underappreciated penny stocks. In fact, some of the most experiences stock market players buy during the bear market and sell when the bull market comes. Once you learn the basics of how to start trading stocks, you will figure out strategies that work for you.

Watch this YouTube video by Timothy Sykes about Pump and Dump strategy specifically related to penny stocks trading: