One of the most important aspect of how to trade stocks effectively is the catalyst. Every time I mention the catalyst, people want to talk about something else. Why? A trader buddy of mine said well Lance, I just read the chart and follow that. What?! No!
How To Trade Stocks For Beginners
If you want to learn how to trade stocks for a living then you need to know how to buy stocks that are likely going to keep going higher because a catalyst is pushing them higher.
You can be the best chart reader in the world. You can have an account on stockcharts.com and you can spend years studying every technical indicator ever invented. You can subscribe to John Murphy, the father of modern day technical analysis, and learn all about how to read a chart and how to use various technical indicators. You can master the MACD, volume, stochastics, Bollinger Bands, ADX... every indicator ever invented! But if you don't know what the catalyst is, you will find it very difficult to make money stock trading online.
Here's what most traders don't understand. You can know absolutely nothing about how to trade stocks online or how to read a stock chart or even how to use any technical indicator. If you are good at determining catalysts, you can make a fortune on Wall Street. In other words, you can make a lot of money with online stock trading and know nothing about how to read a chart, if you are good at finding catalysts. The opposite can not be said. You can be the best chartist in the world but if you don't know how to define catalysts, you will find it difficult to make money stock trading.
Have you ever wondered why your trading, no matter what chart pattern you use, breaks down? You know, when the chart looks great and you buy and the stock still goes against you? The reason is that you don't understand the importance of the catalyst. No computerized chart in the world is going to give you the catalyst. In order to determine the catalyst, you must be human. This is why your stock trading keeps breaking down on you. You are following computers only that are not consciously aware. You will never learn how to trade stocks online successfully without understanding how to find a catalyst.
A catalyst is news or an event that can change a trend in a stock. A catalyst is the engine that will drive a stock either up or down.
Catalysts change the perception of a stock's worth or value. A catalyst is often referred to as a story. Stocks with strong catalysts are called "story stocks". A catalyst can be a lot of different things: earnings releases, lawsuits, FDA rulings, management changes, new products, product recalls, and even marketing campaigns.
How To Trade Stocks After Hours
With catalyst stock trading, you need to be careful of the "after hours" market. Big news stories that can impact the price of a stock are often released after the market closes in "after hours" trading.
It is easy to learn how to trade stocks in the after hours market. Most brokerage firms allow you to trade in the after hours market easily. For example, in etrade you select the option to trade in after hours from a drop down menu under type of trade.
I don't recommend buying stocks in the after hours market because the seller knows that he has the upper-hand and can demand whatever he wants for the stock. However, you might have the rare occasion where you need to sell a stock quickly and the after hours market is the only way for you to do that.
Frequently Asked Questions about How To Trade Stocks
What stock trading account is best?
Etrade Pro is the best stock trading account on the market. Also, the best type of account for stock trading is called a "margin account". A margin account will let you get around the restriction of "3 business days to settle the trade" that cash only accounts have. A margin account is needed to "short stocks" as well. Make sure you sign up with ETrade Pro, and open a margin account.
Jason Bond Picks posted the video below on how to use Etrade Pro for scanning stocks in real-time.
Click HERE to learn more about Jason Bond Picks
What happens when you trade stocks?
When you trade stocks, your orders go to a stock exchange. The stock exchange is a place where buyers and sellers agree on price, and then a trade happens.
MoneyWeekVideos posted the educational video below called What is a Stock Exchange?
In the video below, you'll learn more about the catalyst and just how important it is to understand, when you learn how to trade stocks for a living. I'm also going to give you a look at Jason Bond's DVD set called The Basics of Swing Trading that he sells. Enjoy!
Do you have a question about this lesson that is not already covered? Use the form below to send in your question.
Subscribers will get this lesson and others like it emailed at the rate of 1 lesson per day for the next 50 days. Fill out the form below and subscribe now!