How To Start Stock Trading
How do you start stock trading from home for a living? Learn the best way to start making money and trading at home for a living. Folks, I wish I had a lesson like this back when I started trading in the 1990s.
How To Start Stock Trading Online
One of the most overlooked aspects of how to start stock trading online is the online brokerage firm you choose to sign up with. It is the lens at which you see the market with. It is the very essence of your market vision. If you don’t have a good clean lens at which to look at markets with, you are probably never going to see your way right to becoming a profitable trader.
Home Stock Trading Setup
To start online trading I recommend ETrade Pro. I’m not an affiliate of ETrade and I’m not being paid to tell you this. I’ve used TD, Scottrade, and ETrade Pro. ETrade Pro has the best software on the market. As long as I make 30 trades a quarter (1 trade is a buy and 1 trade is a sell), or 15 round trades, I get ETrade Pro free. I also have the capability of depositing money electronically, as well as taking money out electronically. I always hated how Scottrade let you put money in electronically, but if you wanted to take your money out electronically, too bad, you can’t do that unless you set up a Scottrade Bank account. That just never sat right with me.
I also like ETrade’s mobile app. It is light years ahead of any other mobile app. It can even get live level II streaming quotes and CNBC streaming news right to your smartphone or tablet.
Number of Monitors
I recommend you start out with three monitors. One monitor should be dedicated to the S&P 500 real-time streaming chart. One monitor should be dedicated to a live streaming CNBC news video feed. One monitor should be dedicated to your actual order entry and trading platform. I did a video on a two monitor setup here, and a three monitor setup here.
How to Start Stock Trading From Home
After you setup an Etrade Pro account and your trading monitors, you need to learn good money management techniques such as how to scale into a trade to lower your risk exposure.
How to Scale Into Trades
One of the first things you should know when learning how to start stock trading from home is how to scale into trades. There are some how to start stock trading from home books that refer to scaling into a trade as buying more of a stock as it drops. That’s not how to scale into a trade.
You want to use scaling to minimize your initial loss taken when your stop loss is hit. For example:
In real numbers let’s say you want to buy 10,000 shares of ISR @ $0.55 on the candle over candle pattern that formed on November 10th and 11th. You are betting that it’s going to breakout above $0.55. However, you set a stop loss @ $0.49 because $0.55 resistance may hold. Rather than betting the entire $5,500 (10,000 shares x $0.55) on the $0.55 breakout and run back up the chart, your initial investment is 1/3 of that or $1,833. The next day on November 12th, ISR drops down to $0.52. If it drops again and hits your stop loss @ $0.49, you lose 11% or $201.63 + brokerage fees. That’s a lot better than losing 11% of the entire $5,500 which would be $605 + brokerage fees.
Now if the $0.55 resistance is broke, you scale further into the trade by buying another 1/3 or $1,833 at $0.57. If $0.60 is broke to the upside, you buy your last 1/3 or $1,833 at $0.61 because you figure that if $0.60 is broke, this stock is running back up to $0.72 resistance.
Traders will often call the initial 1/3 position a “pilot” trade or refer to it as “testing the water”. Scaling into trades will help you sleep better at night and build your confidence because there’s not as much money at stake if you were wrong to buy at $0.55 on the candle over candle pattern.
Technical Stock Screener
After you setup an Etrade Pro account, trading monitors, learn money management techniques such as how to scale into a trade, you need to learn how to use a stock screener. You need to know how to use a stock screener and what settings to put into the screener to get a list of stocks you can research further. I did a lesson on using the best stock screener here.
Frequently Asked Questions about How To Start Stock Trading
What online broker is best for a small investor?
The best online broker for a small investor is Etrade in my opinion.
Etrade is one of the cheaper discount brokers.
What online broker is best for beginners?
Etrade is the best online broker for beginners because it is the trading platform recommended by Guerilla Stock Trading and Jason Bond Picks.
When you are a beginner and you are learning how to trade, you want to have the same trading platform as your teachers.
Trust me, there’s a lot to learn and the last thing you want to interfere with your learning how to trade is wondering how you do something you just learned about with your online broker.
There are just too many trading platforms on the market to teach effectively in all of them. That’s why Jason Bond and I picked one trading platform that offered cheaper trades for beginning traders, but is powerful enough to scale up as you learn more about swing trading, day trading, and options.
What online broker is best for penny stocks?
The best online brokers for penny stocks is SureTrader and Interactive Brokers. Etrade and Scottrade are both good for taking the long side of the trade in penny stocks; however, if you want to short penny stocks that trade for under $5, you have to go with a specialty broker like SureTrader or Interactive Brokers.
eHowFinance posted the video below called Penny Stocks : How to Short a Penny Stock.
Make Money Trading Stocks posted the video below about the danger of trading penny stocks called How to Trade Penny Stocks? Sell the Stock Short. His english is not real good but you should be able to understand him.
What online brokerage is best for day trading?
The online brokerage that is best for day trading, in my opinion, is Etrade Pro.
You get streaming CNBC video with Etrade Pro and the charting is awesome.
Jason Bond Picks recommmends ETrade Pro and many lessons from Jason Bond and myself are done in Etrade Pro. As a student of trading, it’s best that you use the same online brokerage firm for day trading as your teachers.
I posted the video below on using ETrade Pro for day trading and why I made the switch a couple of years ago.
Stockhaven posted the excellent video below called How to set up your scanner in Etrade Pro.
Matt G with Jason Bond Picks posted the awesome video below called E*TRADE Pro Scanning.
How many computer monitors do I need for day trading?
Three monitors is good for day trading. You can have one monitor with a live streaming chart of the major indices like the S&P 500, one monitor for your day trading chat room and news, and another monitor for your order/trade processing.
Eddie Z posted the video below called Trading Computers – Multiple Monitors from Around the World.
I posted the video below about using a USB graphics card to connect a trading monitor.
How do I scale into a trade?
How to Scale into a Trade
The best way to scale into a trade is to start off with a small “pilot” trade.
Some stocks are under distribution and so when you buy, immediately you allowed someone else to sell and get out of the stock. As a result, right after buyers come in, the stock sells off and goes down. Every stock has it’s personality and some stocks behave like this. I affectionately call these stocks Killjoys.
The idea behind scaling into a trade is that if you start out with a small “pilot” trade to test the water, and the stock immediately drops after your initial small entry, you can exit the trade with a minimal loss. This allows you to better manage your risk. For example, if you scale into your trade in 1/3rds (33% of your total position) and the trade goes against you, you can take a $50 loss instead of a $150 loss.
There are a variety of different stategies for scaling into a trade. For example, rather than scaling in with even 1/3rds, some traders like the pilot trade to be 20%, the second buy to be 40%, and the third buy to be another 40%.
In all cases, you buy on the way up as major resistance levels are broke, instead of on the way down (i.e. doubling down which is usually a bad idea).
If you bought on a swing move up reversal after a candle over candle pattern, then your pilot trade might be the candle over candle entry, your 2nd trade is the next day closing higher which confirms the candle over candle reversal, and your third trade is when a key pivot or resistance level is broke to the upside. Each entry may be spaced over a couple of days, or in the case of a fast move up, within a few hours. Of course the time it takes you to scale into a trade is relative to the trading strategy you are using: day trade, swing trade, long term hold/investor.
How much money do I need to start investing?
How much money you need to start investing depends, in part, on the type of trading that you will be doing.
If you are going to day trade, then you need to start with at least $25,000 to avoid the “pattern day trader” rule.
If you are going to trade covered options, then you need to start with at least $10,000 so you can buy the underlying stock, and then write an option against that stock.
If you are going to swing trade, then you need to start with about $3,000 to $5,000. The more you can start with, the better, because broker fees will impact your cost basis less. Also, you don’t want to start swing trading with only enough money to buy just one stock because if you are wrong on just one trade, you are wiped out.
If you are going to invest, then you can start with $2,000 because you are going to buy and hold 3 to 4 stocks (about $500 in each stock) for several months to a year or more. You are not going to have a lot of brokers fees to pay and you are willing to stay with an uptrend for a gain of 15%, 25%, and more.
Everybody debates the topic of how much money is needed to start investing. After giving you my opinion above, I’d like you to hear how other traders, investors, financial websites, and professional money managers answer that question. The more intelligent opinions you hear, hopefully it will better help you form your own opinion.
The Motley Fool posted the great video below called How do I start investing, and how much money do I need to invest?
eHowfinance posted the excellent video below called Investment Advice : How Much Money Do You Need to Start Investing?
eHow posted the educational video below called Stock Investment Tips : How Much Money Do You Need to Invest in Stocks?
HowToInvestNow posted the video below called Invest to Success : Step 2 – Marshal Your Resources: How Much Money Do You Need To Start Trading?
Please remember that GuerillaStockTrading is not a licensed financial advisor and does not give financial advice. Please seek a licensed financial advisor so that he/she may evaluate your unique situation.
What is the minimum amount of shares one can buy?
The minimum amount of shares you can buy is one but not in all cases. Etrade and other brokerage firms offer DRIPs (Dividend Reinvestment Program) which take the money you receive when a company pays a dividend, and immediately purchases additional shares of that company’s stock. You don’t have to place an order, pay a commission, or even purchase a round number of shares. With DRIPs, fractional shares are purchased which is technically less than 1 share.
Final Thoughts on How to Start Stock Trading From Home
Make sure you know the difference between real stock trading advice, and a stock education website. Stock education websites are a great way to lose all your money. For example, a stock education website might talk about what the Ascending Triangle pattern is and then show you a few charts of the Ascending Triangle pattern working. However, when you try and trade an Ascending Triangle pattern yourself, you lose big on the trade. If you find that the Ascending Triangle predicts an upward move only 55% of the time, which it does, it means that you have about the same chance of hitting a winner from an Ascending Triangle pattern as you do just flipping a coin. You want advice from a real trader who knows how to stock trade from home for a living and NOT a stock trading education website.
In the video lesson below, I will give you my best nuggets of wisdom for how to start stock trading from home. Even if you are a seasoned trader, this lesson will help you make even more money.