Investing | Trading Winner

How I Started Trading

How I Started Trading – Part 1

How I got started in Stock Trading.

My adventures in stock trading all started one day when the Trading Bug bit me. Just kidding.

Since I was a kid, I have always wanted to start and run my own business. I wanted to become a successful entrepreneur. I consider myself creative and inventive, which is likely a result of my obsessive love of Lego’s growing up. I have always had a passion for creating ideas in my head, then building them up myself, whether it be playing with Lego’s or building my knowledge with my Trading Winner blog.

My desire to become a profitable investor started in high school. In my junior year I was given a choice of classes I would like to take. I chose economics. I didn’t know much about economics, finance, or business going in to the class, but thanks to a great econ teacher, Mrs. Pride, I quickly learned the basic elements, ideas, and strategies used in business. I knew I should pay close attention and keep a keep a mental notebook of all the things I learned in economics class. I was motivated not only by my own desire, but also by the powerful, yet relaxed, style Mrs. Pride used to convey her own knowledge.

Mrs. Pride would always have a weekly or monthly project for our class. One project was to build and manage a virtual stock market portfolio. The winning team was given a price, a pizza party. I love pizza so I wanted to be the winner. Unfortunately, my team and I did not win. But, I gained valuable experience and the potential success one could gain in the stock market sparked my interest.

Another project she gave us involved stock market research, or Due Diligence. Mrs. Pride assigned us a publicly traded company and our goal was to produce a written and oral report about everything we could research about our company. My company was Apple Computer (NASDAQ: AAPL). She had us write and mail a letter our company’s public relations office and ask them to send us a copy of the annual report. We also had to find out everything else we possibly could. We had to analyze the report, do our research, and then present our company to our class. This project helped me to learn the fundamentals of researching stocks and companies. At the end of the class, I knew the basics ideas used in analysis, research, and investing. Most importantly, my interest in the stock market had sparked and ignited.

In college, I continued my pursuit of business and financial knowledge. I had a long and deep love for computers, in addition to my interest in business and finances. Half of my classes were dedicated business (which I use as an umbrella term for finance, economics, accounting, investing, entrepreneurial studies, etc.), and the other half of my classes I used to develop a stronger foundation in computer science.

I took many business oriented classes in college, in order to learn as much as I possibly could. One saying I love is “knowledge is power”, which I strongly believe to be true. The classes I took, and tried to master, were: economics, finance, accounting, marketing, sociology, psychology, mathematics, statistics, and general business studies. I have taken numerous classes on each subject, learning as much as I could in order to master the topic. I wouldn’t call myself an expert in any of those fields, but I probably know more than the average person.

In addition to classes I have taken, I have also read numerous books, articles, and magazines relating to business, investing, trading, or general finance. There are too many great books to mention, but I’ll name a few of my favorites: The Intelligent Investor by Benjamin Graham, which covers investment principles and value investing; The Art of War by Sun Tzu, which has helped me plan, strategize, and execute my ideas; and Rich Dad, Poor Dad by Robert Kiyosake, which I strongly recommend everyone read and learn. These books, among many others, have inspired me not only to learn, but to develop and apply myself to becoming successful and reach my personal goals.

How I Started Trading – Part 2 coming soon.

Using Stop Loss Orders to Reduce Risk

Using Stop Loss Orders to Reduce Risk

First we need to cover 3 major questions about stop loss orders:

What is a stop-loss order?
Why should a stock market trader use stop loss orders?
How do I place a stop loss order?

What is a stop loss order?

A stop loss order is an order that you place through your broker that tells your broker to sell your shares if the stock price hits a specified price. When the stock price hits your stop loss price, the order will execute and your shares will be sold.

Why should I use stop loss orders?

Stop loss orders are used to reduce the risk you are taking on when you buy stocks. Stop loss orders will automatically execute when the stock price hits the lowest price you want to sell at. Generally, most traders will use a stop loss of 1-2% of their entire portfolio value. So that if the stock trade is bad, they’ll only lose 1-2% of their portfolio, which on a good day, a skilled trader can make this loss back plus more.

How do I place a stop loss order?

Placing a stop loss order will vary from broker to broker. Most online brokers have this order type in their normal order entry page. You may need to contact your broker for instructions on how to place stop loss orders using their system. With Ameritrade, it’s pretty simple. Stop Loss is one of the order types to select from.

An example of how a stop loss works.

You have $10,000 dollars in your entire portfolio. You buy 100 shares of XYZ stock at 10.00 per share. First, you need to calculate the greatest amount of money you’re willing to lose on this trade. The money we’re willing to lose is the amount of risk we are willing to take. Most daytraders are willing to risk 1-2% of their entire portfolio value. We will use 1% of our entire portfolio value in this example. The math is: (entire portfolio value) * (percentage of entire portfolio value we are willing to risk or lose). For our example, this will be $10,000 (total value) * .01 (.01 is the numerical representation of 1% – which is how much we will risk). $10,000 * .01 = $100. We are willing to lose or risk $100 on this trade.

Now we need to calculate the share price we want to set our stop loss at. You take the current value of your XYZ holdings, which is $1000 (100 shares times $10 per share). Subtract the maximum amount you are willing to lose from our XYZ value: $1000 – $100 = $900. This $900 is the amount of money we will have if our stop loss order executes. Now, take $900 and divide it by the total number of shares to get our price to set the stop loss at: $900 / 100 = $9. So, $9 is our stop loss price. This is the price you will sell XYZ at due to risk management of 1% of total portfolio value. If and when the price of the stock falls to $9, our stop loss order will automatically execute and sell your stocks.

By using stop loss orders, we know our risk and how much money we may potentially lose in a trade. Psychologically, we are prepared to accept the loss, since we know our sell out price. Stop loss orders reduce risk by limiting potential losses in poor trades.

Silver Exchange Traded Fund (ETF): SLV

Silver Exchange Traded Fund (ETF): SLV

Introducing the new silver exchange traded fund (ETF): SLV

You can get in on the hot commodities and precious metals actions without owning physical metals such as gold and silver coins. Exchange Traded Funds (ETFs) allow you to invest in commodities and precious metals, like Gold and Silver, and watch your ETF investment grow as the prices of gold, silver, and other commodities rise.

For those unfamiliar with Exchange Traded Funds, or ETFs, read my Exchange-Traded Funds – ETF on my Investing Winner blog. ETFs have many advantages and can benefit every stock trader and investor.

People have recently asked me about an exchange traded fund based on the price of Silver. One such silver ETF is the IShares Silver ETF, with ticker symbol SLV (ETF: SLV).

About the iShares silver trust etf:
Price: $138.12
Today’s Change:: +9.12 (+7.1%)

The SLV etf is sponsored by Barclay’s Global Investors and has been in the works for more than a year. Silver’s big brother gold also has an ETF in active trading, ticker symbol GLD.

Investors and traders alike have been waiting for the creation of the silver ETF. We can see their support and liking of the new SLV etf with the 7% jump in the price of the ETF, which was introduced on the stock markets on Friday, April 28, 2006.

Global investors are predicting both silver and gold will continue to rise even more than they have in the past year, due to concerns over Iran’s nuclear program, weakened dollar, gas and oil prices, and buying of precious metals by world banks.

SLV price quotes and charts

TD Ameritrade – AMTD

My online stock broker, TD Ameritrade (formerly Ameritrade – now TD Ameritrade, since the merger between Ameritrade and TD Waterhouse) has just put their newly redesigned website online last Friday. This is the first big change and big news we have seen from TD Ameritrade recently.

Big News from TD Ameritrade TD Ameritrade announced on Monday lower trading commissions! This is great for traders and investors alike. We can now save a little bit of money on each trade. TD Ameritrade’s new commission fee per trade is $9.99, lowered from $10.99. I am one happy trader! TD Ameritrade clients now save 9.10% on commissions fees – the difference between 9.99 and 10.99 being 9.10%. A $1 drop in commissions may not seem like much to the average trader, but for those placing a lot of trades, the $1 in savings adds up quickly.

TD Ameritrade: Strong Earnings TD Ameritrade also announced earnings on Monday. Second quarter earnings were $172.8 million, or 30 cents per share. Last year’s second quarter earnings were $77.4 million, or 19 cents per share. TD Ameritrades earnings have doubled from last year’s second quarter.

TD Ameritrade Stock Down 9% on Monday The earnings doubled, but the stock price fell over 9%. Why? With the 9% decrease in commissions fees, TD Ameritrade announced a weaker forecast for the coming year, due to less commissions income. My personal opinion is that traders and investors will be more willing to place more trades with lower commissions. We’ll have to wait and see how my opinion plays out during the rest of the year.

TD Ameritrade New Advertisement Blitz I’ve seen new ads for TD Ameritrade on CNBC and on various stock market websites, such as Yahoo! Finance. Once ad on Yahoo! I saw stated “TD Ameritrade – up to 50 free trades + $100 cash”. Earlier on Monday I also saw a similar ad, except it stated “+$500 cash”. I’m sure there are stipulations for receiving $100 or $500 cash, such as a minimum initial investment of $25,000 or perhaps a larger investment. I haven’t read their fine print on the free cash, but I know they’ve been giving free trades to all new TD Ameritrade members, which is still nice.

I’d like to hear your opinions on TD Ameritrade in general, and more specifically their new website, earnings, and advertisement campaign.

MarketClouds.com: Stock Market Trading Clouds

Indroducing Market Clouds – www.marketclouds.com – stock market activity and popularity indicator using clouds.

I have developed a new tool to assist stock market traders and investors in finding the most popular and active companies traded on all of the stock market exchanges: Market Clouds.

Market Clouds allows stock traders to quickly scan and identify the most actively traded and popular stocks, using different font sizes for levels of activity.

How Market Clouds Work Market Clouds utilizes data from across my network of websites as well as forums and IRC chatter talk to build a list of stocks people are currently and actively requesting quotes, charts, and news for.

Why are some stock tickers bigger? The most popular and actively traded stocks have the largest font sizes. Less active or popular stocks have smaller font sizes. The stocks with the least amount of activity have the smallest font sizes.

How Market Clouds Helps Traders Large font sizes allow us to scan the entire list of daily hot stocks or stocks that are very active. Traders can quickly identify the most active – they have huge font sizes and are easier to spot and read than the less active stocks. Less active and popular stocks have tiny font sizes, allowing market traders and investors to easily cut out the noise.

Put Market Clouds on Your Website or Blog! I have created a Market Clouds service I call MyCloud, allowing you to include a customizable Market Cloud on your own web page. View Market Clouds’ MyCloud in action in my sidebar on the right!

As with any research you do, you must perform Due Diligence on any potential trade. Market Clouds should be used to identify possible trades, based on their trade activity and popularity. These are the stocks people are requesting quotes, viewing charts, or reading news about. Market Clouds should be used in conjunction with other research tools and analysis. You should not buy a stock simply because it is the most active or popular stock with the biggest font size. It could be this stock is actively trading because people are selling all their shares!

Check out Market Clouds – All Stocks, the Market Clouds – Top 100, and the Market Clouds – Over the Counter Bulletin Board Stocks (OTCBB). Put Market Clouds on your website or blog with Market Clouds – MyCloudI welcome all comments and criticisms. If you have an improvement I can make, let me know. I hope you enjoy Market Clouds as much as I do!