Success Trading: Yet More Basic Terminology for New Traders

In this day and age of online brokers for virtually every market out there, there are some very useful tools that will help protect your account and lock in profits when you have them. It is our recommendation that you use a good online broker and take advantage of not only the low commissions they offer, but also the automated tools that are available. These tools are virtually idiot proof if you use them. The number one reason that people's accounts go belly up in the markets is because they lack the discipline to stick with their trading plans and let emotions drive their trading decisions. This approach is a guaranteed way to lose in the markets. Oh, you might get lucky on occasion, but eventually the market will take your money. Let discuss some of the trading tools we're talking about.

Stop Loss ? Also called a "stop", this is the price at which your position will be automatically closed. If you buy IBM at $50 per share, and then enter $45 as your stop level, then your position will be sold when the price hits $45. So this enables you to protect your account from a large loss. Bear in mind, however, that this stop level only "triggers" the closing of the position and doesn't guarantee you'll get out at that price. A quick price drop might mean your order was executed at $42 instead of $45 because of market volatility ? but this would be an extreme case. Also, if you carry the position overnight and IBM opened at $40, then that's the price it would be sold. Keep in mind that if you had "shorted" IBM at $50, then your stop would be placed above $50 to protect your account. When the stop is triggered on a short position, you would be buying to cover the position.

Buy Stop ? The description above pertains to a "sell stop", but there are also "buy stops" that can be very useful. These are used to enter a position at a certain point. Suppose you're using a trading system requires that you buy when a stock breaks above a certain price level. Let's say that you are waiting for IBM to break out of a channel and to do so, it would need to reach $51. In this case, you simply place a buy stop at $51 for the number of shares you desire and your online broker's system will buy that for you automatically whenever IBM hits $51. The only thing you would have to do and check back occasionally to see if the order has been filled.

These two tools, the sell stop and buy stop are invaluable to traders ? especially those who are just starting out. Make this a habit from day one in your trading ? ALWAYS place a stop loss immediately after getting an order filled. Obey this rule and the market will never hurt you very badly ? you'll take a hard sting every now and then, but you'll stay alive to come back another day!

Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics. He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets. Chuck has owned various businesses and presently operates several websites. To learn more about trading the markets, visit his website, http://www.earncashathometoday.com/trad ing-stocks.htm

In The News:


pen paper and inkwell


cat break through


Building The Foundation For Wealth

You wouldn't build your home on anything less than a... Read More

Short Term Savings Products

When you invest, it simply means that you are putting... Read More

Secret Stock Options Trading Strategies the Experts Don`t Want You to Know

To understand stock options, we need to look at Webster’s... Read More

Options Made Easy and Investor Education - Simple Enough for a 10 yr Old Kid

How many of you out there think that the market... Read More

Protecting the Tax Advantage of Your Deferred Compensation

The American Jobs Creation Act of 2004 imposed strict new... Read More

Beginning Investor - Investment Terms

Over the course of the past two months, readers have... Read More

Success Trading: Some Basic Terminology for New Traders

The world of trading can get very complex because the... Read More

Missleading Fund Names Wreak Havoc On Investor Returns!

Mutual fund managers use fake fund names to part you... Read More

An Old Dividend Stock Investment Idea, for a New Generation

Death and taxes! The certainties of life! And then, of... Read More

Part II of Day Traders and Swing Traders and Options? Maybe!

Before every protective put trade it is possible to calculate... Read More

Reasons For Joining An Investment Club

Whether you're a novice investor or an experienced stock picker... Read More

Looking For a Safe Investment? Try a Certificate of Deposit

If you are looking for a safe investment and you... Read More

Trading Expert Discovers Ways To Beat Stock Market Odds With Money Management

The first point to mastering money management is that you... Read More

Before You Start Investing

There maybe several reasons why you to want to invest... Read More

Rolling your 401k: Contributory IRA vs. Rollover IRA

In an ideal world you would start your working career... Read More

Waiting 20 Years Can Cost You Millions - Dont Wait Start Today

Many Young people live for Today. They really don't fully... Read More

Retirement Is A Scary Proposition If Youre Without A Plan, And Running Out Of Time

Of the 75 million baby boomers nearing retirement today, many... Read More

The Benefits of Laddering Your CD Investments

If you've decided to stock some money away in a... Read More

Overbought/Oversold

Has your broker ever told you that a stock is... Read More

Evaluating A Money Manager

Scams and frauds are designed to take your money through... Read More

Landlording 101, Tricks of The Trade

Looking Inside Your Tenant's Mind Basic Mind-Reading Report 101 for... Read More

The Myth of the Earnings Yield

AbstractA very slim minority of firms distribute dividends. This truism... Read More

5 Day Trading Tips for Success

1. How to Treat Gap Openings A gap up or... Read More

Copy Cat or How to Use a Successful Trading System

How many books have you read about successful traders? How... Read More

Preparing to Invest: How to get started

Investments can be a source of great potential earnings. The... Read More

Are You An Investment Dummy Like Me?

I am good at a few things. I can certainly... Read More

Retire Dollar Smart

Jim Miller is a registered investment advisor. This means that... Read More

Can Using Sales Leaseback Method of Investment Property Acquisition Reduce Risk?

Sales Leaseback compared to traditional property investmentCan a Sales Leaseback... Read More

Creating Momentum with Options - Pro and Cons of At-the-money, In-the-money, and Out-of-the-money

To create momentum in your options trading you need to... Read More

Should You Put Your Annuity in an IRA?

Let me start by answering that question...if an annuity fits... Read More

How to Choose the Right Share Class

You'll want to opt for the no-load or institutional share... Read More

Porters Five Forces Analysis

If you've ever listened to Warren Buffett talk about investing,... Read More

IF - The Wonders of Investing

If it seems... Read More