Category: How to Start Trading – Beginners

Day trading stocks – How to find best trading platform
4 min read

Day trading stocks are powerful and exciting. Moreover, they are easy to buy and sell. With the progress of technology, the market is easily available. Speculating on prices going up or down in the short term is absolutely visible.

Also, stocks are simple to understand and follow.

Attempt to identify which stocks to trade intraday won’t be as challenging as it is in other markets. But if you want excitement, you can choose to trade in the complex technical world of cryptocurrencies or forex. Even if it burns your mind. Of course, you can manage with the triumphs and potential traps of Google and Facebook far easier.

Day trading vs stock investing

Before you start day trading stocks, you should analyze whether it surely suits your conditions.

For example, intraday trading regularly expects a couple of hours each day. One of these hours has to be early in the morning. You have to be there when the market opens.

Longer term stock investing, however, normally takes less time. It gives you more flexibility as to when you do your research and analysis.

Further, intraday trading returns can beat those of long-term investing. This is the influence of leverage. This allows you to borrow money to capitalize on chances, to trade on margin, in other words. However, with grown profit potential also comes a greater risk of losses. Do you know that? Moreover, you will also invest more time into day trading for those returns.

Somebody would say day trading is harder because you focus on day trading one stock only. This is because interpreting the stock ticker and spotting gaps over the long term are far easier. You also don’t have to hurry to make judgments when investing. Hence, this also means intraday trading can provide a more exciting and stimulating environment.

Day trading stocks platform

The major advantage of CFDs and spread betting over traditional assets investment is the ability to “go short“. It isn’t easy to make money in a collapsing market using traditional approaches. Day traders, however, can trade regardless of whether they think the value will rise or fall.

Frankly, there is no precise answer in terms of day trading vs long-term stocks. Spotting trends and growth stocks in some ways may be more simple when long-term investing. On the other hand, intraday trading may yield you higher returns.

How to day trading stocks

The best day trading stocks can give you opportunities through price movements and opulence of shares being traded. This will provide you to enter and exit those opportunities quickly. We recognize these circumstances as volatility and volume. So, let’s break down these terms:

Volume

Volume is the total number of shares traded in a security or market during a specific period. Each transaction adds to the total volume. If, for example, in one day is made 32 transactions, the volume for that given day is 32.

How a day trader can use this in order to make his stock picks?

Volume is an indicator giving weight to a market move. If there is an unexpected spike, the strength of that movement is dependant on the volume during that time period.

In simple words, the greater the volume, the more significant the move.

How to use volume?

If you have a solid capital, you need stocks with notable volume. Well, your brokerage account will possibly provide you with a list of the top 20-25 stocks. But you would like to expand your search a little wider.

That way you can find opportunities that are below other trader’s radar. You have to find stocks with a spike in volume.

For example, a stock mostly trades 2.5 million shares per day. But you notice that it usually trades 4 million shares by 9 AM.

What does it mean? It means that you have made a good examination and you have a better opportunity.

Hence, you have to choose the platform with the diligent screener for high volume stocks.

Volatility

Volatility refers to the amount of risk/unpredictability in the size of changes in a security’s value. If there is high volatility the value could be spread over a large range of values. This means the price of the security could change dramatically in a short frame of time. It is perfect for the fast-moving day trader.

On the opposite situation, if it has low volatility, the security’s value will remain almost steady. But it will offer less opportunity for a quick profit.

How to use volatility

One way is to use the beta. The beta predicts the total volatility of a security’s returns against the returns of a relevant benchmark (normally the S&P 500).

Day trading stocks

A stock with a beta value of 1.4 has moved approximately 140% for every 100% in the benchmark.

So, a stock with a beta of just .6 has moved 60% for every 100% in the comparative index.

The way you use these parts will affect your possible profit and will depend on your strategies for day trading stocks.

Day trading platform

This is the general name for any software that helps you analyze, and make a trade. It may grant you access to all the technical analysis and indicator tools and resources you need. The best day trading platform may also identify trades and even automate or execute them in line with your strategy. No matter you’re after trading platform for beginners, or as an advanced trader. With more options than ever before, doing your research is more important than ever.

Firstly, you’ll find out exactly how these platforms work. Also, you will touch upon the platform’s demo accounts, equipment, and regional differences.

It may be difficult when you select a broker for day trading. As a trader, you want to pay several dollars per trade. That’s because you want low-cost trades. But a platform with great tools is important to you too. Therefore, you have to pay more and you are agreed with that.

Some day traders will tell you the platform design isn’t important so much. Day trading as a profession is risky business. So, it is very important to find the best trading platform.

So, we feel free to recommend 2 of plenty we tested for day trading stocks.
- Fidelity
It is a full-service broker with over 19 million retail brokerage accounts and over $2 trillion in client assets.

Fidelity charges $4.95 per stock trade, $4.95 plus $.65 per contract for options trades, and is highly regarded for its quality customer service, extensive retirement services, and all-around investment offering.

The company’s tradition of putting clients’ interests “before our own is a big part of what makes Fidelity special,” the fund firm says in its mission statement.

Streaming quotes are included as well as 48 total columns of data to choose from. Furthermore, the workflow is seamless, making it a breeze to transition into equity research or into the docked order ticket to place a trade.
More about Fidelity you can read on our Wall of Fame.
- TD AMERITRADE
The company offers an electronic trading platform for the purchase and sale of financial securities. Such as stocks, futures contracts, exchange-traded funds, options, mutual funds, and fixed income investments.

It also provides margin lending, and cash management services.

Ameritrade develops and provides innovative brokerage products and services. They are tailored to meet the varying investing and portfolio management needs of individual investors and institutional distribution partners.

Through its brokerage subsidiaries, it provides a dynamic balance of investment products and services that fit the changing needs of investors. The company’s full spectrum of services for the individual investor includes a leading active trader program.

Such as long-term investor solutions, including a national branch system. As well as relationships with one of the largest networks of independent registered investment advisors.
21st February 2019
Gold Markets Break Out Above The Resistance

1 min read

Gold markets rallied significantly during the trading session on Tuesday. If the US dollar continues to fall, and it certainly shows itself likely to do so, the Gold markets will quite often rally by proxy. This market has a significant amount of resistance above. We are towards the top of the overall consolidated range, you have to keep in mind.

At this point, there is a lot of sounds spreading to the $1350 level. So, this is a very bullish looking candle. It would not be surprising to see some sort of pullback in this marketplace but now the $1325 is support level. It was resistance before.

If gold can break above the $1350 level, the break will become the gate opened, and the market should very promptly go towards the $1400 level.

Hence, the idea of buying pullbacks in this precious metal sounds quite good. Well, as we can see, the strong uptrend certainly looks likely to continue.

Take a look at this chart. You can see that the market just broke out above a bullish flag, and of course, have cleared a significant resistance. So look for value and you will be rewarded.

But the $1300 level underneath is a massive floor in the market. It will be difficult for this market to break down through there. If so, then the $1275 level should offer support. There’s a couple of various places where the buyers will return. Look at short-term charts, but you should get the opportunity to pick up gold cheaply fairly soon.

Maybe too many traders have rallied to buy on this level.

It would make sense that the pullback happens.

A precious metals bullion coin sales rebounded in January with the strongest monthly sales in two years. The U.S. Mint sold 65,500 troy ounces of the gold American Eagle and 4,017,500 troy ounces of the silver American Eagle in January 2019 – 12% and 24% increases respectively over the same month last year. In January 2018, investors purchased 58,500 troy ounces in gold bullion coins and 3,235,000 in silver bullion coins.

Many analysts credit the Washington Gold Agreement of 1999 as the seminal document at the heart of this precious metal secular bull market. In it the top central banks agreed to gradually curtail the sale and lease of gold reserves, two activities that kept the price rangebound for much of the 1990s. At the time, it was stuck in the $270 to $300 price range. From there, it never looked back.

Fast forward to 2011 and we begin to see central banks moving from the net seller side of the gold fundamentals ledger to become net buyers. Some analysts applauded the simple retreat from sales and leases as a major victory for gold bulls. The move to becoming net buyers was the icing on the cake. In 2018, central bank gold purchases reached their highest level in fifty years according to World Gold Council data – a profound development the machinations of which have yet to be fully digested in the marketplace.

The bottom line

The gold market fresh 10-month high could be the start of a renewed uptrend in the precious metal. Because the market has broken important resistance levels, according to some economists.

Commodity analysts have been turning more bullish on gold since last month. It came after the Federal Reserve signaled that it would pause its interest rate hike cycle for the foreseeable future.

Analysts have noted that a “patient” U.S. central bank, will keep real interest rates low and provide less of a tailwind for the U.S. dollar. Growing economic risks and the rising fear of a global recession will also keep the pressure on equity markets, economists have also said.

risk disclosure

20th February 2019
Position Trader: Know When To Go Long or Short
Position trades requires just a half of hour work per day, but profits can be great.

By Guy Avtalyon

Position trader has a long-term approach to trading. Rather than ready, set, go, it’s more like ready, set, stay for a while. It is a trading methodology that seeks to capture trends in the market.

The idea is to reach the income without getting stopped out on the retracements. Hence, it is great for traders who prefer analysis but may not have as much time to dedicate to continually watching stocks.

Here, we’ll give you some insight into the pros and cons of position trading. Including what it is, is it right for you, and how to start.

When it comes to trading, do you go long or short?

Many traders do not have the time to trade the most well-known styles such as Intraday, Day, or Swing Trading. All of these styles want more time, a higher capital base, and the ability to be trading early morning or afternoon while the market is open.

Position trading is a unique type of trading that is defined by longer holds of security. It provides an alternative that is actually more profitable with less time.

Typically position traders hold time anywhere from a couple of weeks to a couple of months, which is the resistance that will stall or reverse the trend.

But, it applies the same fundamental research methods as shorter-term trading.

Pros:
- It requires less than 30 minutes a day
- It’s fitting for those with a full-time job
- Less stress compared to swing and day trading
Cons:
- You’ll watch your winning trades turn into losing trades, often
- Your winning rate is too low. It is around 30 – 40%.
Can you accept this?
Excellent!
Let’s go further!

If you search online for position trading, you will find a decent amount of information about forex trading.

But very limited information you can find about position trading stocks.

Let’s say, the first challenge, then, is to find a definition of position trading.

Position trader definition

A position trader is a trader who holds a position, usually stocks, for the long-term. It can be from weeks to months and even years. Position traders usually use a combination of technical and fundamental analysis. That’s in order to make proper trading decisions and often do more to evaluate the companies behind the stocks.

Position trader, often known as “buy and hold” trader, takes longer-term positions usually based on long-term charts and macroeconomic circumstances. These traders work in almost every market, including stocks, ETFs, forex, and futures.
They aren’t only committed to buying. They can also hold long-term short positions making money as an asset decline in value.

Position trading benefits

Position trading is taking a position in an asset, expecting to participate in a major trend. Such traders aren’t concerned with minor price fluctuations or pullbacks. Instead, they want to capture the bulk of the trend, which can last for months or years.

The main glamour of this approach is that it doesn’t require much time. Once the fundamental research is done, and the position trader has decided how they want to trade the asset, they enter a trade and there’s little left to do. They monitor their position from time to time. But since trivial price fluctuations aren’t a concern, the position requires little oversight.

Who is a position trader

It is the opposite of the day trader. Day traders make trades each day and spend hours trading.

Swing trading is less time-intensive than day trading since trades last a couple days to several weeks. But this still expects time to monitor and find new positions each week.

Position traders usually make zero or three trades a year in assets they own. Swing traders would make a few hundred trades per year, and day traders would make hundreds to thousands of trades at the same time-frame.

Where to find trends

Support and resistance let you buy low and sell high.

An uptrend occurs only after breaking above the highs of a range. So, if you want to enter your trades before the price breaks out, you have to do so at the moment when the market is changing.

And the best place to go long is at support, the point when the market is moving.

Trends often begin with a breakout of a range or other chart pattern that had limited the price action. So, when the price breaks out of the pattern it can often trend for some time. This is especially true if the chart pattern lasted for a number of years. That indicates the price could trend for a number of years once it breaks out.

Chart patterns range, triangles, cup and handles, head and shoulders, an inverse head and shoulders, all indicate a trend could begin or re-rise.

As an investor, you want to pick a stock that will benefit you over time from a long-term trend.

The timeline isn’t a fixed and unchangeable part, you might hold a position for a week to even years.

In an aim to ensure that your investment can pay off over time as a position trader, you need to put a lot of emphasis on fundamental analysis. You have to do plenty of research about potential companies, examining press releases, earnings reports, and analyzing charts before making decisions about which stocks to trade.

But position trading is not the same as long-term investing.

When position trading you must have this approach: it’s actually the last level of trading before you called it long-term investing.

The main difference between position trading and long-term investing is that the former can be a long-term position, but depending on the trajectory of the trend, it might not be. Hence, the latter is only a long-term position.

Why use position trading

This is a simple but important fact: If you want to be a successful trader, it’s important to figure out what type of trading the best suits you.

This is usually the sum of various factors:
- The size of your account
- The amount of attention and time you can dedicate to trading
- How fast you want to grow your account
- And last but not least, of course, your risk tolerance.
Your trading experience also matters.

We wouldn’t tell anyone to jump right in and try to take advantage of pre-market trading, for example.

This is a more advanced method that requires experience and courage.

How to find position trades

There are several ways to position trading. For example, buying assets that have strong trending potential but haven’t started trending yet. Or alternatively, buying an asset that has already begun to trend.

Buying assets that have already begun to trend is a less intensive attempt. Hence, it is favored by many position traders.

Finding a trend is the main component of a position trade. This will usually eliminate any assets trading within a range.

Unless the price range is very large and crosses for many years. In such a case, it could take years for the price to move from one side of the range to the other. But this suits the position trader very well.

Is a position trader a long-term investor?

No, it’s different. Being a trader, what might attract you to try this style?

The main benefit, position trading is somewhat accessible to new traders. The speed isn’t as wild as day trading or swing trading. So you have a bit more time to draft your course of action and build a trading plan.

Position trading is less demanding on a day-to-day basis. You don’t have to watch charts on an hourly basis. All that is need is to check your investment to make certain it’s operating according to the trend you identified previously.

On a deeper level, position trading can also be more attractive in various types of markets.

For example, if there is a bull market in a scene and there are strong rising trends, it can be a good time to engage in position trading.
20th February 2019
The risk-reward Ratio

3 min read

The risk-reward ratio is a formula used to measure the expected gains of a given investment against the risk of loss.

It is typically shown as a figure for the assessed risk separated by a colon from the figure for the prospective reward. The adequate ratio can vary, but trade experts recommend a ratio between 2:1 and 3:1 to determine a worthy investment.

Typically, the ratio quantifies the relationship between the potential money lost, should the investment or action fail, versus the money realized if all goes as planned.

In other words, the risk-reward ratio measures how much your potential reward is, for every coin you risk.

For example:

If you have a risk-reward ratio of 1:2, it means you’re risking $1 to potentially make $2.

But, if you have a risk-reward ratio of 1:4, it means you’re risking $1 to potentially make $4.
Investors use the risk-reward ratio to define the viability or worthiness of a given investment. You can limit risk by issuing stop-loss orders, sometimes. That will trigger automatic sales of stock or other securities when they hit a particular price. If you don’t implement such a mechanism in place, the risk is likely endless.

How to use the risk-reward ratio like a pro

Let’s be clear: the win rate in trading it totally trivial on its own. Some traders put way too much importance on the win rate. At the same time, they don’t understand that a win rate will not tell you anything about the quality of a practice or a trader.

The truth is that trader can lose money with a 70% or even with a 90% win rate if few losers are so big that they wipe out trader’s winners. But, the trader can have a successful system even with a win rate of 40% or only 30% if such a trader lets winners run and cut losses short.

It all comes down to the reward-risk ratio.

The reward to risk ratio (RRR, or reward risk ratio) is probably the most important metric in trading. A trader who understands the RRR can improve his chances of becoming profitable.

But, however, there are some myths about risk-reward.

Myth 1

“You need a minimum of 1:2 risk reward ratio.”

That is nonsense.

Why?

Because the risk-reward ratio is insignificant on its own.

We will give you an example:

Let’s say you have a risk-reward ratio of 1:2. This means, for every trade you win, you make $2.

But, your winning rate is 30%.

To have a clear picture, out of 10 trades, you have 7 losing trades and 3 winners.

Let’s do the math…
Total Loss = $1 * 7 = -$7
Total Gain = $2 * 3 = $6
Net loss = -$1

You see, you are not the winner.

And you understand the risk-reward ratio by itself is an insignificant metric.

There is nothing like good or bad risk-reward ratios. It just comes down to how you use it. You can even trade profitably with a risk-reward ratio of 1:1 or less.

So, you must combine your risk-reward ratio with your winning rate to know whether you’ll make money in the long run. That is known as your expectancy.

Myth 2

The risk-reward ratio is useless

Some traders like to say the reward-risk ratio is useless. It cannot be further from the truth.

When you use the RRR in combination with other trading metrics, such as win rate, for example, it instantly matures as one of the most important trading tools.

Without knowing the risk-reward ratio of a single trade, it is literally impossible to trade profitably.

The risk-reward ratio isn’t enough

Do you want to know the secret code?

Here it is.
E= [1+ (W/L)] x P – 1

Now let’s put this all together and let’s take a look at some performance statistics and how the RRR fits in.

Below, we see a performance simulation based off a strategy with a win rate of 50% and a risk of 2.5% per trade. The RRR was first set to 2:1 on average per trade.

You can see that out of those 20 simulated outcomes (the different graphs), all of them were positive after 500 trades.

Remember, with a win rate of 50%, you just need a RRR greater than 1:1 to trade profitably. With a 2:1 RRR you can potentially trader very profitable with a win rate of 50%.

Now let’s take a look when the only thing we change is the RRR. Everything else is the same.

Assume that each trade has a RRR of 1:1.

Out of the 20 simulated outcomes, only a few will generate a positive outcome and many show a negative outcome.

To conclude, with a win rate of 50%, trading a RRR of 1:1 is very volatile and variance will be huge. You have to remember, with a win rate of 50%, you need a RRR greater than 1:1.

Now let’s take a look when the only thing we change is the RRR. Everything else is the same.

Assume that each trade has a RRR of 1:1.

Out of the 20 simulated outcomes, only a few will generate a positive outcome and many show a negative outcome.

To conclude, with a win rate of 50%, trading a RRR of 1:1 is very volatile and variance will be huge. You have to remember, with a win rate of 50%, you need a RRR greater than 1:1.

The bottom line

Portfolio with more unknown factors may have a higher probability of failure but at the same time offer a significantly higher return if they are successful. The ideal is the low risk-reward ratio – the little risk of failure and a high potential for reward.

risk disclosure

12th February 2019
A European Call option – What is it?
There are many differences between European and American styles in trading call options. Here are all.

By Guy Avtalyon

A European call option means an option for the right to buy a stock or an index at a certain price on a certain date. Notice the expression “on a certain date.” This “European style call option” is different from the “American style call option” that can be exercised at any time “BY a certain date.”

A European call option provides the investor with the right to purchase an asset, while a put option provides the investor with a right to sell it.

In other words, unlike an American option, the European option has no flexibility in the timing of exercise.

Formula

In theory, a European option has a lower value than an otherwise equivalent American option. It is because a European option does not enjoy the convenience that arises from the flexibility in the timing of exercise.

Value of a European Call Option = max (0, Asset Price − Exercise Price)
Value of a European Put Option = max (0, Exercise Price − Asset Price)

Asset price is the price of the underlying financial asset at the exercise date.

The exercise price is the price at which the option entitles its holder to sell or purchase the underlying financial asset.
Some examples

European call option

To differentiate between a European call option and an equivalent American call option we have to compare them here.
Let’s say, a trader bought 100 American call options stock. The option has an exercise price of $42 and an expiry date of 27 July 2018. The trader believes that stock price on 24th, 25th, and 26th of July is expected to be $43.5, $44.5, and $43.

Assuming a trader is very confident in owns projections, what is the maximum can gain on the options and when should exercise them?

Since trader bought American options, he/she can exercise them at any time before 27th. Based on the projections:

Value on 24th = max [0, $43.5 – $42] = $1.5
Value on 25th = max [0, $44.5 – $42] = $2.5
Value on 26th = max [0, $43 – $42] = $1

The trader should exercise the options on 25th and gain $2.5 per option.

But, the trader bought European options, and he/she would have been able to exercise them only on 26th July 2018 for a gain of $1 per option.

Assume that traders used European options instead of American options.

Solution

Since trader purchased European options which she can exercise only on the exercise date i.e. 26th July 2018 and not before, trader’s gain per option will be only $1 (i.e. option value at the exercise date = price of underlying asset ($43) minus exercise price ($42).

If the trader had bought American options, he/she could have exercised them on 25th July 2018 (the day it offered maximum gain) for per option gain of $2 (= $44.5 − $42).

Like their American Option counterparts, a European option is traded on an exchange. The contract will specify at least four variables.
- Underlying Asset: stock indexes, foreign currencies, as well as derivatives.
- Premium: the price paid when an option is purchased or sold.
- Strike Price: identifies the price at which the holder of the contract has a right to sell (put option) or buy (call option) the underlying asset.
- Maturity Date: also referred to as the expiry date; the option no longer has any value if not exercised on this date.
As is the American Options, European-style options also come in two basic forms:

Call Options: also named calls. This contract gives the holder the right to purchase the asset at the strike price on the maturity date.

Put Option: also named puts. The contract gives the holder the right to sell the asset at the strike price on the maturity date.

Most stock or equity options in the U.S. are American Styles, whereas most index options traded in the U.S. are European style. Since you can’t actually “exercise an index option” and by the index, index options are cash-settled. Cash-settled means that your broker simply deposits the “in the money” amount at expiration.

What does the European style option mean for the trader?

It means that you are concerned ONLY with the price of the stock or index at its expiration. European style options tend to be cheaper than American style options because if a stock spike prior to expiration. An American style call option trader can profit on that increase in value. The European style option trader has to hope the price increase holds until expiration.

When to buy a European Call Option

If you think a stock price or index is going to go up, then you should buy a call option. Unluckily, you don’t get to select if you want to buy a European style option or an American style option. That decision is already made by the exchange that the option trades on. Most index options in the U.S are European style. Take a look at the chart below:

Example of a European Call Option

If you bought an S&P500 Index option, it would be a European style option. That means that you can only exercise the option on the expiration date. Of course, it is still an option, which means that you have the right but not the obligation to exercise it.

Obviously, if you have a call option and the Index closes below the strike price on the expiration date then you would not exercise it. And that option would just expire worthlessly. Likewise, if you have a put option on the Index and the Index closes above the strike price on the expiration date then you would not exercise it. And that option would just expire worthlessly, too.
Notice in the chart above that the S&P500 Index (SPX) is a European style while the S&P100 (OEX) is American style.

In the U.S., most equity and index options contracts expire on the 3rd Friday of the month. Also, note that in the U.S. most contracts allow you to exercise your option at any time prior to the expiration date. In contrast, most European options only allow you to exercise the option on the expiration date.
5th February 2019
Stop loss hunting – What to do?
3 min read

The truth is, there are players in the market that are hunting your stop loss.

Stop loss orders are designed to limit the amount of money that can be lost on a single trade, by exiting the trade when a specific price is reached.

For example, a trader might buy a stock at $50 expecting it to rise. Trader place a stop loss order at $47. But the price goes against the trader’s expectations and reaches $47. In that case, the stop loss order will be executed, limiting the loss to $3 per share.

All new traders should use a stop loss. The stop loss order is placed when the trader enters a position.

Why is that so important?

Markets are moving very quickly. A stop-loss is employed to limit the possibility of a loss. It also gives the possibility to trader having to get out of the trade if the price goes against him.

Stop loss is a must.

Stop loss position is very important and you should be able to distinguish where to set it. A too tight stop loss can be easily triggered even when you take the right position. And a too wide stop loss is like having no stop loss at all.

Where is the best place to set the stop loss?

You should place the stop loss at the level that will be triggered when your position is totally wrong.

We are referring to stop orders going forward, plain vanilla stop order, opposed to a stop limit order.

For example, the price is going up. You are waiting for some reversal signal. But, the price changes its direction and makes a reversal trade setup. And then starts going down. You take a short position. So the last high that the price has made before it goes down is a resistance level.

But what if you realized that taking a short position has been a wrong decision and the price will keep on going up again?

If the price goes up and breaks above the resistance level, it means you were wrong and the uptrend was not reversed. Therefore, you have to be out. That is why professional traders say: You are either right, or you should be out.
So where should you place the stop loss in this example?

image source: tradingwithrayner.com

A few pips above the last high (resistance level) plus the spread.

When price moves to your preferred direction and you are making the profit, you can move the stop loss further to lock some part of the profit you have made. At least, you can move the stop loss to breakeven, entry price, when you are in a reasonable profit. So, if the market turns around, you will get out with zero loss.

First of all, what is stop loss hunting?

Do you know that forex brokers make money when you take a position? Yes. They charge you some pips when you buy a currency pair. This number of pips that brokers charge when you buy currency pairs is called spread. Brokers offer different spreads for different currency pairs.

But, the spread is not the only way that forex brokers make money. It is one of the ways. They also make money through the swap. Market brokers make money through commission as well. However, the commission is the only legal way of making money for the true ECN/STP brokers. They can make money through other ways, but they are not allowed to.

Short note: STP refers to Straight Through Processing and it is just a name given to dealing desk brokers that have automated the dealing process. Traditionally in the spot forex market, when you place a trade, you are being filled by your forex broker is also known as an RFED.

ECN refers to Electronic Communication Network. ECN can best be described as a bridge linking smaller market participants with its liquidity providers through a FOREX ECN Broker.

However, whatever you pay as the spread goes to the market maker broker pocket. Also, the money you lose is the market maker broker profit. Say that, when you trade Forex through a market maker broker, in fact, you are trading with the broker, not the real currency market.

So it makes sense that the market maker brokers like you to lose.

Your loss is their profit. Similar, it is expected they don’t want you to win because your profit is their loss. Market make brokers make a lot of money. The statistic shows that 99% of the trader lose on their own and nobody needs to push them to lose. However, some market maker brokers get greedier and want to make more money faster.

YOU WOULD LIKE TO READ Automatic Trading – What Is It

Stop loss hunting is one of the ways they use to do that. They have some special robots or train some employees who monitor the clients’ trades.

How does it work?

The trader takes a short position and sets a stop loss. The market goes against the position and becomes so close to the stop loss. And the robot or the stop loss hunter employee increases the spread manually to help the price hit the stop loss earlier.

But, most regulated brokers are not hunting your stop loss because it’s not worth the risk.

The word gets out that some broker hunts their client stops loss. What? It’s a matter of time before clients pull out of their account and join a new broker.

Would you want to risk doing that over a few tiny pips?

We guess not.

Most brokers don’t hunt your stops as the risk is greater than the reward.

But, your broker widens the spread and stops you out of your trade.

There is a reason for this.

A broker widens their spreads during major news release. The market has low liquidity during this period.

YOU WOULD LIKE TO READ Stop Loss Order and How to Use It

Take a look at the depth of the market. The bids and offers are low just before the major news release. The participants in the market are pulling out their orders ahead of the news release.

The liquidity during such period is thin and that results in a wider spread.

Because of this, the spreads in forex is widener. If it isn’t, there will be opportunities for arbitrage.

So, you can see that widening is not there for fun their spread for fun. Your broker is doing it to protect themselves.
Most brokers don’t hunt your stop loss because it’s bad for business.

How to avoid stop loss hunting by setting a proper stop loss

Let’s say, you find such broker.

You can still protect yourself and beat the sharks who are hunting your stops.

What can you do?

Here are 3 techniques you can use:
- Don’t place your stop loss just below Support (or above Resistance)
image source: bpcdn.co
- Don’t place your stop loss at an arbitrary level
- Set your stop loss at a level where it invalidates your trading setup
The bottom line

The one way to stay away from the stop loss hunting is trading through a bank account.

Trading the longer time frames is another way of staying away from stop loss hunting. Well, nothing can 100% prevent a scam broker from cheating the clients. But trading the longer time frames is a good way to lower the risk. On that way, you will have wide stop loss orders that are harder to get hunt unless the broker increases the spread for hundreds of pips.

In general, you will finally have to close your account and leave when you trade with a scam broker that hunts your stop losses and cheats because nothing that fully stops them from cheating you.

Therefore, you’d better choose a good broker from the first day or trade through a bank account.

risk disclosure
4th February 2019
Personal finance – How to Manage?
Traders Paradise will walk you through some suggestions on how to manage money in your 20s

By Guy Avtalyon

Update on Feb 12, 2019

We received an email from our visitor Christopher Trum, Content Manager LendingTree Brands, that asked us:
”I was reading a recent article on Traders Paradise (traders-paradise.com/magazine/2019/01/personal-finance) and wanted to thank you for including data from our research study!”
With his permission, here is the link with full access to the original source
https://www.lendingtree.com/finance/places-millennials-carry-the-most-debt/

Personal finance is something that has to be well managed no matter how old is someone.

Who is going to take care of your own personal finance so early, for example in the 20s?
You may not think of your 20s as the time to buckle down financially. Between beginner salaries and student loans, many young people at their 20s bearly sustain to live from paycheck to paycheck. I know that. But what I also know is that your 20s are the best time to set the base for your financially secure existence. Yes, it is the right time to take care of your personal finance. Both, now and in the future.

Current status and future

You’ve probably graduated from college, started your first job, and are starting to make decisions on your own. Your adult life has just begun and retirement seems years away. But this is the right time to discuss your personal finance choices, how to manage your money responsibly, and to plan your financial future.

Personal finance exactly that: how you manage your money, your income, expenses, and savings, all of them. The truth is that you have to put an effort into managing your personal finances. In that way, you’ll better understand where your money is going. Also, you’ll better recognize if you have to make changes to meet your future financial goals.
Managing your personal finance better is something that can literally pay off. It can help you stay on top of your bills and save thousands of dollars each year. With that extra savings, you can pay off any debts you might have. Or maybe you would like to put that money towards your pension or spend them on your holiday or new car.

Create a budget to protect your personal finance

I know, for many of you creating a budget is critical. But without a budget, you’ll have difficulties to track your finances. Moreover, how will you identify key savings opportunities? So, if you don’t have one yet, take a time to map out your living costs.
Budgeting is the process of tracking your income, bills, and expenses in order to assess how much you can spend and what you can afford each month. Creating a budget and sticking to it is the foundation for personal financial success as it helps you to live within your means and avoid debt.

You don’t need any advanced tools to create a budget. All you need is to open up a spreadsheet on your laptops or phones and add your all expenses. It’s okay to add the random ones that pop up once a year. Then compare what you’re spending on what you’re earning. If the numbers don’t align, then you’ll need to work on making some changes to ensure that you leave yourself enough space for savings.

When creating a budget, you have to write down:
- Your income: How much are you making per pay period?
- Your expenses and payments: How much you spend on rent/mortgage, utilities, groceries, etc each month?
- Debts owed: How much do you owe for student loans, credit card debt, and similar?
Pay yourself first – Start your emergency savings

The recommendation is to pay yourself first. That means the first bill paid each month should be some paybacks if you have any. The second is to pay for utilities, put aside money for living buyings. And everything left over at the end of the month is your extra money. Open a savings account and put it there. The biggest mistake is the young people make is not saving early enough. They tend to put off savings until their 30s. That is wrong.

Just because you’re on the younger side doesn’t mean you’re immune to financial emergencies. Quite the contrary. Without emergency savings, you may have no choice but to get out costly loans. A better choice is to have an emergency fund. It has to be at least the amount you need for three months’ living expenses. Ideally, more like six months’ worth.

Having emergency savings is very important. In fact, it should trump any other financial aim you may have.
Let’s look at an example: Assuming you want to have $1 million in savings by the time you retire at age 65. This is how much you’ll need to invest each month:

Time is on your side when you’re young. You should save about 20% of your earnings. That should help you maintain your current lifestyle in retirement. If you want to travel more and more entertainment when retire, you should save about 30% of your earnings. That will help you have a lifestyle better than what you currently have.

A little bit of money saved now is going to make a big difference later in your personal finance.

Pay off present debt to secure personal finance

According to a recent study by LendingTree, the average millennial has an average of $24,000 in debt. This can paralyze your financial, and even your physical and mental health.

AVAILABLE FOR US residents ONLY

Large amounts of debt can seem daunting to pay off. Hence, it’s important to make a plan. You have to start paying it off quickly. Just include it in your budget as a monthly payment. But if you have more than one debt, which to pay off first?
You have to consolidate debt to one payment with a lower interest rate when possible.

But you may be more driven to try the debt avalanche or debt snowball methods of repayment.
Never focus on just one expense at a time.

If you owe money to a friend or family member and paying that debt off is a mental relief, pay that as first and then move on to other debts.

It’s important to make a plan to pay off and manage your debt to avoid heavy interest fees.

Get out of credit card debt

Credit cards are the worst enemy in anyone’s personal finance. Anyone who runs out of cash simply turns to credit cards. But can you afford to pay the balance? Combat the urge to use your credit cards for the shopping things you can’t afford.

The U.S. credit card debt increases every year. For example, the average household debt is nearly $16,000. So much!

The essential part of your good account balance is to eliminate the debt from the credit card as soon as possible. Actually, you’re wasting your hard-earned money on interest costs. By doing so you’ll have a double benefit: you’ll get out of debt and you’ll improve your credit score. And that is crucial if you plan to buy a home or lease a car in the near future.

Build credit

Never live above your resources and use credit for money that you don’t have. Never buy things on credit if you don’t have the resources to pay it off in full at the end of the month.

A credit report is a report that shows your credit history and is used to determine your creditworthiness. Building a strong credit history and maintaining a high credit score is essential for your financial health. In your early 20s, it’s important to build your credit by paying your credit cards and utilities on time but avoiding debt in the process. Instead, use a credit card to build credit. That could be a smart use example. Of course, if you can’t afford to pay it off by the end of the billing statement, you apparently can’t afford it.

It is important to make sure you don’t break the terms of your agreements. So even if you want to pay down added debt, you have to pay at least the minimum on your credit cards.

Investing your savings if you want to take care of your personal finance

When your savings start to grow, you can add more money to your pension. It’s a great way to make sure you’ll be able to live more comfortably later in life. Or you can make an investment plan based on your goals and timeframes.

If your savings goal is more than five years away, putting some of your cash into investments would allow you to earn more from your money and keep up with rising prices. Investments are something where you put your money to get a profit. You can choose from four main types of investment:

Shares – you buy a stake in a company
Cash – the savings you put in a bank or building society account
Property – you invest in a physical building, whether commercial or residential
Fixed interest securities bonds) – you loan your money to a company or government

There are other types of investments available too, including:

Collectibles, such as art and antiques
Commodities like oil, coffee, corn, rubber or gold
Contracts for difference, where you bet on shares gaining or losing value

The different assets owned by an investor are called a portfolio.

As a general rule, spreading money among the different asset classes will lower the risk of your overall portfolio. More on this you can find HERE.

For emergency savings, the best place for your cash is the bank. For long-term savings, investing in stocks is efficient for growing wealth. And you don’t need to take an extreme amount of risk. Sure, the stock market can be volatile, and it’s had its share of ups and downs through the years. But it’s also historically delivered a roughly 9% average annual return, which is about nine times more than what you’ll get from a savings account today.

The good news is, you don’t need to be an expert to enter the stock market. If you’re not comfy investing in a particular company, just put your money into exchange-traded funds or ETFs. These low-cost funds simply seek to track existing indexes, like the S&P 500, and because they offer instant diversification, they’re a less risky prospect than buying up individual companies’ stock.

Protect yourself financially

As you enter maturity, you’ll want to make sure that you are protecting yourself and your finances with adequate insurance. Take advantage of the benefits offered at work: health insurance, life insurance, short and long-term disability insurance. You may consider some benefit packages outside of your current work offers.

Fight for a higher salary if you want to take care of your personal finance.

Your 20s are a time to pay your dues but that doesn’t mean you shouldn’t fight for more money along the way. In fact, the more money you receive at your current job, the more you’ll probably get at your new job. So, boosting your salary won’t just put more money in your wallet now, but also throughout your working years.

Knowing how to manage your money and where start with financial planning can be terrifying and difficult. Especially when you’re in your 20s. Finances can be complicated, but it’s crucial to find out what is available to you. So, it’smart to start working on financial matters earlier rather than later in life.
31st January 2019
Leverage Trading Stocks – The More Leveraged the Better

3 min read

Leverage trading stocks is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital.

However, you need to understand leverage trading to help fully immerse yourself in the stock market.
The idea behind leverage trading stocks is to increase your potential payout on a play. However, it doesn’t always work out the way you want, and it can prove dangerous for your portfolio and trading account, especially when you’re new to the stock market.

Leverage is the ability to trade a large position with only a small amount of trading capital. We are sure you already find the articles that suggest that trading using leverage is risky. Also, you can find that new trader should only trade cash-based markets, like individual stock markets, and avoid trading highly leveraged markets.
Well, we disagree with this in full. Trading using leverage is no riskier than non-leveraged trading. Also, for certain types of trading, the more leverage that is used, there is the lower the risk.

What Is Leverage Trading Stocks?

In the stock market, leverage trading stocks are using borrowed shares from your broker to increase your position size in a play. So you can potentially make more money on the other side. Options trading, futures contracts, and buying on margin are all examples of leverage trading. But buying on margin is maybe the riskiest.

When you buy on margin, you’re essentially financing your position in the stock.

Actually, it’s just like buying new furniture. For example: Say you want a new kitchen and you talk the salesperson down to $25,000. You don’t have $25K in cash, so you put $2,000 down and finance $23,000 over five years. Every month, you pay the lender your furniture note. That includes the principal, which is the amount financed, and the interest, which is money paid to the lender in exchange for financing you.

People do this every day with i.g. cars and other physical kinds of stuff.

Well, it doesn’t sound so dangerous.

But even a furniture purchase can leave you in financial trouble.

Let’s say you put $2,000 down on your new kitchen and drive it off the lot. A few days later, you lost it in a fire accident. The insurance company pays the kitchen’s market value, which has already depreciated below what you paid for it. In other words, you have to keep paying off your kitchen note even though you don’t have a kitchen.
That’s what usually goes wrong with leverage trading.

How Does Leverage Trading Stocks Work?

Leverage trading stocks work by allowing you to borrow shares in stock from your broker.

For one example:

Let’s say you have $2,000 to invest. This amount could be invested in 20 shares of Microsoft stock. But in order to increase leverage, you could invest the $2,000 in five options contracts. You would have 1000 shares instead of just 20.

Instead of investing in options contracts, you can buy a certain number of shares. Leverage is always expressed as a ratio, such as 2:1. In that case, you could double your position size by borrowing twice what you actually buy.

When you exit your position, you’re responsible for paying back the broker for the shares you borrowed. Whatever you have left is your profit, minus your own initial investment in the shares.

2:1 leverage example

2:1 leverage means you can borrow twice the amount of your investment from your broker.

For example, you want to invest $50,000 in stock, but you only have $25,000 in your trading account. Using leverage, you could buy on margin at 2:1, giving you $50,000 to invest.

It doesn’t come free, of course. You have to make an initial deposit or down payment to your broker for the privilege of buying on margin.

But what happens to your investment?

Let’s say you bought $50,000 worth of stock at $50 per share. The stock climbs to $55, and you sell.

At that point, you have to return the borrowed shares or money to your broker. The brokerage firm extended $25,000, so you owe that back, plus any interest required. The rest you keep as profit.

If the stock price drops, though, you’ll still have to pay back your broker. Plus, you’ll have to cover any losses your broker incurred during the trade. And your own, too.

The Leverage is Incorrectly Considered Risky

Leverage can be highly risky because it can boost the potential profit. But also the loss that trade can make. For example, you make a trade with $1,000 of trading capital but has the potential to lose $10,000 of trading capital.

This is based on the theory that if a trader has $1,000 of trading capital, they should not be able to lose more than $1,000. Therefore should only be able to trade $1,000. Leverage allows the same $1,000 of trading capital to trade perhaps $5,000 worth of stock, which would all be at risk.

Well, this is theoretically correct. But it is the way that an inexperienced trader looks at leverage, and it is, therefore, the wrong way.

Leverage Is a High-Risk Strategy

There are no secrets, investing risk increases with reward. The higher the potential payout, the higher your risk for great losses. This is especially true when you’re trading with leverage because you’re playing with the house’s money.

Brokerage firms require margin account holders to maintain a certain minimum balance. Your cash and owned securities serve as collateral for whatever you’ve borrowed. It reduces the risk for the broker. Though, it increases your risk, because if you borrow too much on a losing position, your account can get wiped out instantly.

The Real Truth About Leverage Trading Stocks

Leverage is actually a very efficient use of trading capital. The professional traders value it because it allows them to trade large positions. Such as more contracts, or shares, etc. And with less trading capital. Leverage does not modify the potential profit or loss that trade can make. Contrary, it reduces the amount of trading capital that must be used, thereby releasing trading capital for other trades.

For example, you want to buy 1000 shares of stock at $20 per share. That would require maybe $5,000 of trading capital. So, the rest of your initial leaving the remaining $15,000 available for other trades.

This is the way that a professional trader looks at leverage. Therefore, this is the correct way.

The bottom line

Leverage trading can be a slippery slope.

On the other hand, the more leverage the better. Professional traders will choose highly leveraged markets over non-leveraged markets every time. Telling new traders to avoid trading using leverage is essentially telling them to trade like an amateur instead of a professional. Every time that pros trade a stock, they always use the highest leverage they can. They would never trade a stock without using leverage.

The next time that you are making a stock trade, consider using a leveraged market instead.

risk disclosure

29th January 2019
PENNY STOCKS – How much does it cost to invest in

3 min read

Penny stocks sound cheap, don’t you think?

Yes, because they are. They are also called micro-cap stocks

Penny stocks describe shares of a company that trades for low amounts. It is usually between $0.01 to $2.00. But some institutions count a penny stock is anything that trades for less than $5.00 per share.

They’re not expensive, so what’s the catch?

So why trade penny stocks?

Everyone who entered the stock market knows that penny stocks equal a bigger risk than regular stocks.

The reason for inflated risk is simple. The companies that hold penny stock typically have no profits and minimal operations.

Many of these companies are speculative because they are thinly traded, usually over the counter instead of on major exchanges like the New York Stock Exchange.

They usually trade on the pink sheets or on FINRA’s over-the-counter bulletin board (OTCBB) and are not required to file with the Securities and Exchange Commission (SEC).

These stocks have low liquidity due to a lack of buyers and sellers. Hence, orders may not be filled right away or even at all. Moreover, volatility tends to be high among OTC (Over-the-counter) stocks, and bid-ask spreads are frequently large.

Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.

Plus, penny stocks are notorious for being part of so-called pump-and-dump schemes. The scammers buy up shares and then promote it as the next hot stock on blogs, message boards, and e-mails. Once the stock price is unnaturally pumped up by all the gossips, the scammers sell their stake. The investors stay with big losses.

But…

Where penny stocks have the advantage is the low cost.

Also because of the simple math of penny stocks. If you buy shares for $0.40, and if the stock goes up by $0.20, then your profit is at 50 percent. That’s the pie-in-the-sky scenario.

However, it’s just as easy for your $0.40 share to go down by $0.20 and lose 50%, instead.

So, a $1,000 investment could lose value pretty quickly.

Of course, not everything is so dark.

Several years ago, CNN published a story about a young man who made his first million dollars from trading penny stocks.

He decided to begin with his life savings of $1,500. And 3 years later his portfolio was worth more than $1 million.
See how worth it was.

So, how to trade penny stocks?

We warned you but, yet you still want to trade penny stocks.

It is possible to trade penny stocks successfully.

If you trade penny stocks successfully, they really can offer the greatest risk-reward ratio of any investment type. But take care, the odds are not in your favor if you don’t understand what you’re doing. The must is, you have to learn. You must have the knowledge, education, in order to understand the market to successfully trade penny stocks.

And you must stay far away from scammers. Read the fine print on any email or ad you see on social media and in emails. If you find a disclaimer at the bottom of a social media post or an email, be cautious.

That means that someone’s getting paid to post an ad.

YOU WOULD LIKE TO READ The awesome thing is that you can invest in stocks online for free. See HOW!

It’s possible to profit when you understand the game, but the odds are against you when you don’t. And worse: manipulators and scammers often run the penny stock game.

For investors who can’t afford shares of Apple, for example, the potential gains from trades like this are too good to pass up.

So penny stock trading prospers. With a relatively small investment, you can make a nice return if the trade works out.

So, if you spot an advertisement that promises dollars from your pennies just remember these several rules:

Never trust the sweet stories

You must not believe the penny stock stories that are touted in emails and on social media websites.

And you have to say no. Let’s say, you can’t invest in penny stocks as if they were lotto tickets.

Unfortunately, that’s what most people do, and they lose over and over. Think of penny stocks as people that you can’t trust.

Instead, focus on the profitable penny stocks with solid earnings growth and which are making 52-week highs.

Read the disclaimers

Penny stocks are sold more than bought. They come as tips in emails and newsletters.

Remember, the free penny stock newsletters are not giving you tips out of the goodness of their heart. Read the disclaimers at the bottom of the newsletters. And you will see. They are getting paid to pitch a stock because their investors want a presentation for the company. There is nothing wrong with that, but almost all penny newsletters make false promises.

YOU WOULD LIKE TO READ Online stock brokers make investing easier than ever

You have to know something. There is a difference between stocks making a 52-week high based on an earnings breakout and stocks making a 52-week high because three newsletters picked it. The disclaimers at the bottom of the email or newsletter, which the SEC requires, reveals very often a conflict of interest.
They are being paid to pump up the stock, but they rarely tell you when to sell. Usually, it’s far too late.

Sell your penny stock quickly

The charm of penny stocks is you can make 20% or 30% in a few days. If you make that kind of return, sell quickly.
Never get greedy, aiming for a 1,000% return. The penny stock is getting pumped up, take any profits. And move further.

Never trust company management

Don’t believe what you hear from companies in this penny stock’s world.

The companies are trying to get their stock up so they can raise money and stay in business. That’s okay, but there is no reliable business model or accurate data. So, most penny stocks are scams that are created to enrich insiders.

There are large circles of the same people run promotions using different press releases and companies.

Never sell short

Don’t do it.

Penny stocks are too volatile. If you’re on the wrong side of the trade, you could lose 50% or more on a short squeeze. Another problem is that it’s difficult to find shares of the penny stock to short. Leave shorting penny stocks to the pros.

Focus on penny stocks with high volume

Stay with stocks that trade at least 100,000 shares a day. It could be difficult to get out of your position if you trade stocks with low volume.

Traders Paradise suggests that you trade penny stocks that are priced at more than 50 cents a share. Penny stocks that are trading less than 100,000 shares a day and are under 50 cents a share are not liquid enough to be in play.

Don’t trade large positions

You really need to be careful with position sizing. Never learn the hard way not to trade big. Famous traders rule is not to trade more than 10% of the stock’s daily volume.

The limitation of position size will provide you to get out of the stock faster.

The bottom line

If you want to invest in penny stocks you have to learn.

By the way, learn from Timothy Sykes, who is famous for turning his Bar Mitzvah gift money of about $12,000 into millions by day-trading penny stocks while in college. For the past years, Sykes has been teaching his strategies through the sale of instructional newsletters and video lessons. You can find his lessons very easy.

28th January 2019
Online stock brokers for beginners

2 min read

It is easier than ever to find good online stock brokers. The benefits are numerous. You can learn and invest in the comfort of your own home. The research team at Traders Paradise made some research. We tried to find the options on the market that are good for you. So, we wanted to find the best online stock brokers for beginners and super investors alike. We had to deep into the financial world with stock experts.

And we hope that this research will help anyone get started.

The popularity of index fund investing and robo-advisors is rising. It may seem the trading of individual stocks is lost. But, it isn’t the truth.

Millions of investors continue to trade individual stocks and other securities. Because online stock trading sites make investing easier it’s important to do so using the best online stock trading sites.

Investors should know the best online stock brokers to trade with. They have the right to know. Some online stock brokers are known for their award-winning customer service. But the others are known for low-priced stock trades or powerful trading tools. Traders Paradise-Finance wants to highlight some of the best brokers available today. Actually, we want to give you some tips for choosing a broker.

Criteria for the best online stock brokers

The best online stock brokers offer low fees, great customer service, and smart research tools.

Discount brokers charge as little as $4.95 for online trades. Compare that to the $100+ that many full-service brokers charge. It seems like a no-brainer choice to choose the discount broker. But, you must know how to pick the right one.

Trading online is a self-directed practice, and you need the right broker backing you up.

But it is a stormy time for online stock brokers.

Between significant cuts in commissions and a few major acquisitions, the competition is fierce.

YOU SHOULD READ Stocks Online for Free – How to Invest

So, let’s like this, there is no one best online stock broker. But each one has different strengths and weaknesses. Our aim is to spotlight them and help you find the best one for your investing style.

Every trader should care about cost. A few of the fees we analyzed include:

Cost per transaction:

Commissions are typically an investor’s biggest cost base. For example, in 2016, a usually unassisted transaction fee averaged about $8. But early 2017 brokers decrease their commission. Fidelity, E*Trade, and TD Ameritrade, also did that. Now, you can trade for as low as $4.95. No matter what the price, though, for us, transparency is key. We wanted to see affordable pricing structures.

Account minimums:

Seeing your wealth shrink due to a tough market or bad strategy isn’t fun. It’s worse if you’re also getting dinged by your broker’s minimum account balance requirement.

Charges for data and tools:

The best online stock trading sites have quality market data like real-time quotes, educational resources, and stock-screening tools built right into their platforms. But some, we have to say, like Fidelity and TD Ameritrade, stand out for also providing top-shelf resources. And it is totally free of charge.

Extra costs:

Executing a trade over the phone, for example, can increase an $8 commission fee to $25 or more. Some platforms offer free education on sophisticated strategies but require an upgraded platform with an annual fee. Besides cost, we valued educational material, reports and tools, and the usability of the platform itself.

After Traders Paradise conducted this research, the following to be our top picks:

The best for cheap trading is Ally Invest. But beginners would like E*Trade. Speaking about the platform the best has TD Ameritrade. Best research and tools have Fidelity.

Why use a discount broker

A discount broker costs you much less money per trade. You won’t have the steep commissions that full-service brokers charge. What this means is more cash in your pocket and the opportunity to make more trades.

The main reason is cost.
But here we will break down who would do better with a full-service broker and who could get by with a discount broker.
Because cheaper isn’t always better.

Let’s see in this way.

Do you have a large number of large investments?
Or you not have the desire nor the know-how to handle your portfolio?
Can you afford high commission fees?
Maybe you not have time to manage your portfolio effectively?

If your answers are “yes” to each of these questions, a full-service broker might be the best option for you.
But, if you want to save money on each trade made or like to be in control of your investments, the discount broker will suites you better.

Because you don’t want to be pressured to take other investments and you want to make frequent trades.
The other things to consider when you have to choose your online stock brokers are:

Minimum deposit/balance:

Some brokers require a minimum deposit to open the account. Others don’t have a minimum. Yet others require a minimum average balance over the life of the account. Determine what you can afford to keep in the account if choosing accounts with a minimum requirement higher than $0.

Customer service:

Take a trial run on any broker’s website that you are considering. Check out the support they have readily available on their website. But you should also email and call them with questions. See how long it takes to get an answer.
A discount stock broker can save you a lot of money and save your portfolio. But they aren’t for everyone. Here are a couple of other choices you may want to consider:

Robo-Advisors: If you are familiar with a completely “hands-off” approach, robo-advisors can save you even more money. The automated system uses an algorithm to invest your money for you. After you input your risk thresholds and investment goals, the computer does the rest.

YOU SHOULD READ Automatic Trading – What Is It

Peer Lending: This is those who want to stay away from stocks and bonds for now. If you are one of them, consider peer-to-peer lending. You decide how much money you want to invest and what type of risk you want to take. The minimum investment is often about $25. You can break your investment up into as many loans as you want. This helps diversify your portfolio.

Full-Service stockbroker: If you have a lot of money to invest or need that in-person advice, a full-service stockbroker is for you. You’ll find them at your larger brokerage houses, but keep in mind that their commissions are higher than discount brokers. In the most common situations, you will have to pay $100 – $200 per trade versus $4 – $7 per trade.

The bottom line

Using a discount broker is a great way to trade and keep your profits. Choose your broker wisely by paying attention to hidden fees and understanding account minimums. A discount broker is a great way for beginning and experienced investors alike to invest in their future.

To find which online brokers suits you the best, you should read Traders Paradise’s WALL OF FAME.

Risk Disclosure (read carefully!)

25th January 2019