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| Answer | How do I make sure I don't lose all my money?
There are several ways to limit the risk involved in stock
trading. First, you must do your research, or as some people
say your "Due Diligence". This involves reading as much as
you can about a company before you invest or trade it. You
must look at all PR and news, stock charts, and what other
people have to say. There are many other facets involved,
but to sum up: you want to learn as much as you can about
your potential investments.
Second, you can use money management and stop loss orders
to reduce risk involved in trading. Money management
involves determining the amount of money that should be
used for a trade. Stop loss orders can be set to sell your
stock if it goes down to a certain price. For example, you
buy stock XYZ at 20. You set a stop loss order at 18. The
price goes to 22, then you set a stop loss order at 21. This
means if XYZ hits 21, you will sell and make 5% on your trade.
However, if XYZ keeps going up, you can keep raising your stop
loss. If for some reason the price goes down, your stop loss
will activate and sell, hopefully at a profit to you.
|  | How far should we go with risk?
There are many factors involved in determining how much risk you
should take. Generally, the younger you are, the more risk you
can afford to take, because you have many years to make up for
early losses. As you grow older, you cannot afford as much risk.
| | What is the difference between investing and trading?
Traders hold stocks for a short period of time, anywhere from a few minutes to a few days. Swing traders and trend
traders may hold even longer, such as a few weeks or even months. Investors, however, hold stocks for a long period
of time, over the course of years.
Traders and investors are also taxed differently. The IRS taxes stocks held less than one year at a rate almost
double that of stocks held more than one year.
Traders make money by rapidly buying and selling, making a large number of low profit trades. Investors make money
by finding promising companies and taking a long term stake in that company.
| | What is Fundamental Analysis?
Fundamental analysis looks at the fundamentals underlying a company. Fundamental analysts look at the Income
Statement, Statement of Owner's Equity, Cash Flow, and the Balance Sheet -- the accounting statements. They also
compare a company to other companies in the same field. Research is extremely important in fundamental
analysis.
| | What is Technical Analysis?
Technical analysis is the analyzation of stocks based on indicators and signals. Example indicators are: MACD, RSI,
EMA, DMI/ADX, Bollinger Bands, and many, many more. Many indicators have mathematical foundations. Technical
analysis allows one to generate a buy or sell signal, or gain more information on possible breakouts or trends.
Technical analysis is much easier to understand by analyzing charts.
| | What is OTCBB (.ob)?
OTCBB stands for Over The Counter Bulletin Board stocks. OTCBB
stocks are not traded on the New York Stock Exchange or NASDAQ,
but on the OTCBB exchange. Many OTCBB stocks are considered
penny or sub-penny stocks. These companies are generally
mini-cap. Some are in, or on the verge, of bankruptcy. OTCBB
stocks are usually a lot more volatile and risky than NYSE,
NASDAQ, or AMEX stocks. However, their potential for reward
is tremendous. Be very careful.
| | What is Pink Sheets (.pk)?
Pinksheets are similar to OTCBB stocks.
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