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Rule #1 and Some Glossary Terms
Rule #1: Never,
never, never ever trade with real money until you have successfully "paper traded" at least
75% of the time.
Glossary Term: Paper
Trading
- Simulated trading on paper.
Glossary Term: Cost Basis -
The IRS defines the cost basis of a stock as:
Cost Basis = Selling Price - (Purchase Price + (Buy + Sell Commissions))
When trading stock you must always remember how much commission you
pay to buy and sell the stock.
Example:
If you buy 100 shares of stock for $3,000 and sell it for $3,010 you might think you made a $10 profit. Not
so. If your Round Turn commission is $40, then, you really have a $30 loss.
Glossary Term:
Round Turn Commission -
The Buying
Commission + the Selling Commission.
You will often see the advertisements from Trading Brokers that say, "$$.$$ per trade".
Each Buy and each Sell are separate trades and therefore, a commission is charged for each one.
Yep, you guessed it. The Broker gets his commission, both in the Buying and Selling, whether you
make a profit or not. A real Bummer!
You will need a book or two that explains the structure
of the stock markets to include an understanding of Market Makers, Specialists, and ECNs. A good free
source is your public library or you can review any of the books in
Step 2 in the Classroom.
We highly recommend "Day Trading into the Millennium"
as a starter book.
So now, with the Simulator, the Quick Start Guide, plus a book or two, you are ready to tackle
Step 3, Understanding The Markets.
Fool School:
Take the
Motley Fool's School of 13 Steps (Click Here)
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