Trading Stocks Online--top 5 Secrets to Making Money

Want to make money trading stocks online? If you follow these five simple tips, you'll be way ahead of the pack.

1) Listen to the charts

You may have found a great stock, and it could have the best fundamentals in the world, but here's the truth-- that's not enough! Even if a stock has a million fundamental reasons to go up, it's not going anywhere unless people are buying it. People don't always act rationally, so you can't assume that a stock will behave as it should. That's where technical analysis (chart reading) comes in. By learning to read charts, you can spot stocks that are poised to move up, or conversely, stocks hopelessly headed down. Reading stock charts will allow you to find stocks which actually will move up, not just stocks you think should move up.

2) Use stop losses

No one is ever right 100% of the time. That's just the nature of the game. Even the best stock pickers sometimes pick lemons, but that's not necessarily a problem. Picking losers, which is inevitable, is only a problem if you let them kill your account. You absolutely must set stop loss orders every time you make a trade, otherwise you may wake up and find your entire account decimated. Remember, to make money trading stocks online, you don't always have to pick winners-- your winners just have to be bigger than your losers. You accomplish this by always cutting your losers early, and then letting your winners run.

3) Don't step in front of a speeding train

One of the biggest myths about making money by trading stocks online is that you have to buy low and sell high. That's a very dangerous way of thinking. Why? Because people, searching for stocks to buy low, eagerly buy stocks which are spiraling downward. They hope, often falsely, that soon after they buy the stock, it will turn around, go higher, and then they can sell for a profit. But ask any experienced trader and he'll tell you that stocks which drop precipitously tend to keep dropping. Don't step in front of a speeding train. Instead, find stocks which are healthily moving up and will keep moving up. Think of it not as "buy low and sell high," but "buy high and sell higher."

4) Ignore the people on TV

There is no shortage of media personalities who love to recommend stocks. Follow their advice and you'll become rich, right? Wrong. If you could make millions by following the guy on TV, everyone would be rich. You've got to do your own homework. You see, it's not necessarily that the people in the media don't know what they're talking about. They often do. It's that by the time that information reaches you, it's too late! Think about it...there are professionals who spend all day looking for the next great stock to buy. Do you really think that by the time a stock pick reaches the general public on TV, the smart money hasn't already bought it? Of course it has, and by the time the little guy buys himself, he's left holding the bag. If you want to make money trading online, you've got to think independently. Otherwise, you'll be behind the curve.

5) Don't overpay on commissions

Let's say you start trading stocks online with one thousand dollars. Now let's say you're paying ten dollars per trade. And finally, let's assume you make thirty trades per month. If you do the math, you'll see that you're doomed regardless of how good your stock picks are! People often get so excited about trading stocks online, they forget about all the money wasted on commissions. If you want to be successful over the long term, you have to find a broker with low enough commissions for your trading style. With some brokers charging as low as one penny per share, there's no reason to waste all of your money in fees. In this way, researching online brokers is just as important as researching stocks.

Keep in mind these five tips and you've already set yourself up for success in trading stocks online. Good luck!

Article written by Ethan Lux