Trading For Beginners and Growing Your Account


No trading for beginners lesson is complete without a lesson on how to recover in the event of a string of losses. How do you grow your stock trading account after blowing it up? Folks, here's a strategy that a trader I know used to grow his account from $2,500 at the start of 2013, to $16,500 as of February 17, 2013. Incredible!

Trading For Beginners

Trading is all about taking a small amount of money and growing it into a lot. But you have to start somewhere. The first step in this trading for beginners lesson is funding your trading account.

Set a goal to put $100 into your trading account each month. Most online brokerage accounts allow you to set up an automatic deposit where your money is automatically taken out of your bank account and deposited into your trading account each month.

The most common question I get asked is: How much money do I need to start investing? You can start with as little as $500. I recommend nothing less than $1,000 to start with because broker fees are such a big percentage of your winnings with anything less. As a general rule, if you open a trading account with $1,000 or less, you don't want to engage in active day trading or swing trading. An account with $1,000 or less is better for a longer term hold so that you keep your per trade fees (slippage) as low as possible.

Trading For Dummies

Trading for beginners can be frustrating because even though you may be hitting 5% to 10% winners with $500 or even $1,000 in your account, it seems like your account really isn't growing. Usually the reason for this is brokerage fees or slippage. You can't use a 5% to 10% target because your cost basis will be too high due to trading fees if you are only trading with $500 to $1,000 dollars. Trading fees are a higher percentage of your total trading account balance therefore, you have to minimize these fees by trading less.

I saw a trading for beginners pdf from years ago that talked about brokerage fees being $80 per trade. Thankfully online trading fees are now around $9 for a buy and $9 for a sell but that doesn't mean you can trade without thinking about the costs associated with each trade.

The next important point when we are talking about trading for beginners is buying stocks.

The next most common question I get asked is: What stock do I buy? I don't feel comfortable answering that question because I'm not a stock broker and I don't have a broker's license. I feel more comfortable telling you what stock I would buy. Really the question is not what stock but rather what type of stock. Hands down the best stocks to buy with the most growth potential are going to be small cap stocks.

stock-trading-memeA lot of trading for beginners books will teach you how to read a chart or how to use a technical indicator but they leave out the most important question: when you are at the trading for beginners level with a small amount of seed or start up money, what are the best small cap stocks to trade?

The best small cap stocks to trade meet the following criteria:

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