I am talking about newbies in the business. I have a friend who wants to start trading stocks and getting into the whole investment thing. She is a stay at home mom and there is really very few jobs that work for her, she asked me if I think it is a good idea, I told her to go to one of those courses on "how to trade" the local community college offers but I am not sure my advice was correct… is it possible for her to live from trading stocks and investing her money?
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If she is very lucky. Day trading isn’t that different than gambling. When you buy a stock your betting that the stock will increase in value. Sometimes they don’t and you lose value. Although you keep your shares of the stocks. I would recommend investing in solid companies with an established track record that pay dividends. This isn’t a buy one day and sell the next gamble. It’s an investment in the long term. Further if you sell a stock too quickly you end up paying a higher capital gains tax. Another words it’s not that easy to make quick and easy money this way. Let me explain it this way.
Let’s say you buy a stock xyz at $100.00 dollars a share. you have $5000.00 dollars to invest. that means that you can buy 50 shares. in a week the xyz stock is worth $101.00 dollars. that means that after you pay for your trading fees normally around 20 dollars you made 30 dollars.
Now if you buy a riskier stock at a lower value lets say zyx at $5.00 a share. You still have $5000.00 to invest. Now you can buy 1000 shares. If the stock changes value to $5.50 you will make $500.00 dollars minus the transaction fees upon sale. bingo you just made around $470.00. Now on the flip side, if the stock goes down below $5.00, let’s say to $4.50. You will have the option of selling at a loss and you will l lose around $530.00. Or you can just hold onto it and hope that it will go up again. Sometimes they don’t and just go bankrupt, then you just lose all your investment.
For more info check out http://www.scotttrade.com or http://www.sharebuilders.com.