So I recently started thinking about dabbling in stock trading. After a lot of thinking and a little bit of secondary research, I've developed A STRATEGY.

I think a lot of people screw up when they get emotionally invested. My theory is that if you make logical if/then type decisions, lay them out, and then follow through with your "then" every time you hit your "if", you can achieve a net gain.

Basically, I want to pick companies that have been relatively constant/have been slowly improving. If I buy at $20, decide that when it hits $25 (or some similarly value realistically close to the original), I will sell. If it takes a little while, that's fine. If it drops, it seems like most major companies (baring a market-influencing event) tend to bounce back from drops, but to safeguard I'd invest little enough money that I don't panic and get emotionally involved and decide to sell prematurely. I wouldn't be buying stocks that are above $40 or so, just because it would dramatically limit the number of shares I'd be able to buy/profit I'd make (ex: if I invest $200 into 4 shares at $50, and they go up to $60, I only made $40. If I invest the same amount into 10 shares at $20 and it goes up to $30, I make $100.).

I'd also keep track of a few important factors in a spreadsheet:
-When I bought
-How much I bought for
-At what price I will sell
-How much I sold for
-When I sold
-Running total of how much I've made off of sales
-Running total of how much I've made - how much I've put in.

I would also keep a running total of how much capital I've put in, and would only reinvest capital (anything I make off of the trades I'd pocket) (But I could always add more capital).

I'd probably make a lot of pretty graphs too, because I really like graphs.

My strategy is simplifying the process and using safe and logical decisions. This strategy definitely won't make me the most money, but I feel like I can achieve a net gain.

HOWEVER. I don't have a lot of experience in this area. So if any of you guys have done any trading before, I'd love it if you shared your experiences and pointed out any blaring logical errors I've made.

IIRC, it costs money, outside of the price of the stock, to buy/sell. So you have to make more than a few bucks to break even.

Also, if your stock goes down, buy more. Expect any money you put down to already be lost. That's the only way to do it. And since you're already invested, buying more cheaper is the practical thing to do, since you're already planning on it going up to past your initial investment. Sure, you might just dig the hole deeper, but essentially you're bluffing instead of folding.

Oh, the other thing: Does anyone have anyone in particular they like to trade through? I was looking at Tradeking last night. They have flat $4.99/trade fees (so yeah, I was aware. But I'm not planning on going down to the penny-stock range and I was planning on setting the sell-price high enough to cover the fees).

That's an interesting idea. I'm not sure if it jives with the "safety focused" site of my strategy.. but it is clever. I will think on it!

Learn how to use orders - stop orders, trailing orders, limit orders, etc.

After you research a particular stock, you need to make two important decisions - how much you want to walk away with, and how much you are willing to lose. After you buy, your broker (etrade or ameritrade or whatever) will have order options. These allow you to set up a specific sell price, then it will sell automagically when it hits that point. If you're in it for the long haul, your lower limits can be low, but don't forget the opportunity cost involved - your $1000 is sitting there, worth only $600, when it could be earning more somewhere else.

For example, you buy 10 shares of XYZ for $10ea. ($100). You decide you want $30 profit ($13/sh). You also decide you will not lose more than $30 ($7/sh). At this point, you need to set your limit $7 low, $13 high. Then stick with them. You must stick with them. If you fudge in this area, it will bite you in the ass. This where your "theory is that if you make logical if/then type decisions, lay them out, and then follow through with your "then" every time you hit your "if", you can achieve a net gain" comes into play. Don't get emotional. A win is win, whether it's the $50 you got, or the $500 you would have gotten if you stayed in longer. Take what you can get. Don't get greedy.

http://www.investopedia.com/ is a great resource.

Also, remember - most trades cost a few bucks to place, so you have to make that cost up (beating the spread, so to speak). Most brokerages also have account balance or account activity minimums. If you fail to meet those limits, they charge a fee. Figure out how much time/money you're going to put in, then find a broker that can work with that.

Most online brokerages offer free "sandbox" platforms that will allow you to play the market with Monopoly money to get used to buying, selling, using graphs, orders, etc. I HIGHLY recommend you try that out before putting in real money.

After learning the ropes, you may find that a margin account is worth looking into.

I used etrade and liked them. They also offer free checking/savings accounts with their portfolios, and have ATMs all over. Further, if you use a non-etrade ATM, they refund you the $2 or $3 or $4 charge that is often incurred. Avoid ScottTrade, those guys are shysters.

Send me a PM, email, or hit me up on Facebook if you want more in-depth info. I day-traded online for a full year, supporting myself and paying for university before realizing I wanted to get married and needed consistent "real" income. I'm not an expert, but I'll help any way I can.

Expect to get started by investing a grand or so.

Yeah, and, since this is your first rodeo, be mentally prepared to lose every penny. You have to be willing to lose it all, otherwise you're going to get emotional about it.

Steven- Awesome post. I'll definitely be emailing you, but that confirmed a bunch of my ideas, and added to them (the "lowest" is a good point. I hadn't thought about the fact it could be making money somewhere else).

Chew- Why a grand? I mean, to get any significant profit, I understand. But if I'm just getting my feet wet..

And yeah, I'm okay with losing it all if it's only a few hundred (which is why I'm starting with a small amount).

Squirrel's advice is good if you're in it for the long haul ("I want to retire in 30 years"). If you won't want/need the money for years, then by all mens, once you pick a good one, stick with it through thick and thin. His advice makes really good sense there, and is the common procedure.

If you're into short term, though ("I want to buy a car next year"), you'll need to move your money around a little bit more often, for reasons stated in my previous post.

It sounds like you're wanting to try it out for a while, without looking to make (or lose) any "big" money. I would recommend you go with the sandbox option I mentioned. http://www.weseed.com/ is one that has been getting lots of press lately. I haven't used it personally, but it seems really good.

Also, research takes LOTS of time. It's not like picking what to have for lunch or what to wear to work. Look to spend at least three or four hours researching ONE stock.

I'm interested in (possibly) avoiding that. I'm well aware that, to make the best decisions and to optimize the payout, that kind (often more) is required. But for short term, small trades, couldn't you just play off of the natural fluctuations in a stock price? I guess that's what I'm actually trying to do here.

What you want to do is called "swing trading." Swing trading is making money of day fluctuations, not actual stock value. Daily or weekly fluctuations can be caused by almost anything (or sometimes nothing). Long term valuation is based on the worth of the corporation, and it usually takes time. Swing trading is based on market fluctuations. Similar to the idea that Peter Gibbons et al. tried to exploit in Office Space.

Swing trading is a unique endeavor, in that it's harder to accurately gauge future events because the "future" is usually less than 72 hours. The challenge is the same as I mentioned above - taking the loss and moving on. Usually, one would trade based on volume, not price. The more "activity" (buying and selling) a stock has, the more potential for price fluctuations. Rather than basing decisions on company worthiness, it's based on stock movement. Rather than trying to make $5,000 in one trade over the course of 5 months, you're trying to make $50 over the course of five $10 trades in an afternoon.

Swing trading has three distinct disadvantages.
1) It takes lots of attention. In long term trading, you buy then check it again in a month, In swing trading, you need to be on it like stink on ****. You want to be able to make the trade. If your upper limit is at $10, and it hits $9.85, sell! Close enough, man! The computer won't do it, though, as the computer is waiting for $10. There are trailing limits, but it's best to have direct attention.

2) It's very stressful. Always watching, always waiting, always yelling "NO NO GO BACK UP" or "SELL DAMNIT SELL" at your monitor is a good way to develop an aneurysm.

3) There's a waiting period after a sale. You usually have to wait for the funds to "settle" after sale before the funds are free for use again. This can take from 24-72 hours. You might spend $100 at 8am, it turns into $130 by noon, but then you can't spend it again until Tuesday. Sure, $30 in a few hours is great, but $30 in three days? Weak. This is where margin trading comes into play, Margin trading is basically playing on credit (not as dangerous as it sounds, but there is still risk involved).

The advantages, though, are also unique - no waiting months or years for the profit , it's WAY more fun and exciting, you don't have to spend as much time researching, and it's easier to make decisions.

I guess I'm looking at (OR INVENTING!) some cross between the two. I was planning on waiting more than 24-72 hours, but not months and months either. I'd be okay with waiting a few days to free the money up (I could have several going at a time, so I could just focus my attention on another).

I signed up for WeSeed. I'm going to play with that for a little while to flush/test out my ideas, see what works, what doesn't, when I should have exceptions or if that ends up just biting me.

Thanks for the help. Could you regale me with stories of your days as a day trader?

Anyone else have any suggestions?

I regularly buy shares of VFIFX. It wont make me rich overnight but it steadily grows and pays a dividend which I reinvest. I plan on sitting on it for years and just keep on adding to it. Maybe I'll use it for a down payment on a house some day, or save it for retirement.

Steven is giving some excellent info. Definitely listen to him.

Something else you might want to consider that is slightly easier to research and estimate, but fluctuates greatly during the days is currency trading. The reason why I say it is "easier to research" is that spot value exchange rates have a strong element of expectation and confidence in them. Remember, currency markets are really nothing other than speculation. Especially in this day and age of awful deficits, you can make a lot of money by merely picking and choosing the countries/currencies you think people will lose confidence in (a lot of people made a **** ton of money off of Greece being a complete ****-up for instance). Although, I'd recommend you have a decent amount of cash to put in before you engage in it, as generally over a day currencies will only go up or down the equivalent of 4 or 5 cents (so you'd obviously need quite a large volume to make a lot of profit, and therefore a decent amount of cash if you end up crashing).

All of the tips Steven gave are perfectly valid for currency trading too. Sometimes it's easier to predict performance when expectations/confidence are a large component of the value, rather than actual performance/output. Also, it's generally fun to learn about the economic conditions and government policies of other countries!

Stock trading sounds too much like gambling.

It is gambling. But just like in (certain types of) gambling, if you stay logical and don't get emotionally involved (and play against people who are emotionally involved) - you can beat the system.

I'll look into currency trading. That could be fun. I'm using WeSeed now, but I'm trying to do it realistically with the amount of money I'd be able to afford to invest. I might set up a separate one for currency trading..

Yeah, foreign exchange trading is way more volatile, way more exciting, and way more dangerous. It's both easier and harder at the same time. It definitely requires direct attention. It also requires trading on margin, which is a little bit more complicated because you have to beat the spread. Shorting is as common as traditional trades (long?). The hard part is that it moves so fast, you can lose (or make) a big difference in, literally, minutes. This is where your orders are invaluable. Figure out your orders before you buy, and set them as soon as you buy.

I did that for a while, and earned some good income, but it's tense. The best part is that it's open 24/7, where the stock exchange has regular day hours and takes off for holidays and weekends. There were a few hot summer nights when I couldn't sleep, so I busted out the laptop and made $80 or $90 from my bed while in my drawers.

I'd recommend you try the weseed for a while. Forex also offers sandbox trials, you could do that, too.

No, it's not gambling at all. We've had that argument already. It has similarities, sure, but it's an entirely different endeavor. I am not going to argue it because it's not productive, and plenty of other people already have and did a better job than I could do.

Honestly, this is probably the best, if the most boring thing to do. While you're young, pick a few stocks for the long haul. Maybe if you acquire some extra money, play around with a few stocks.

The attitude that you've figured out how to cheat the market or that you can develop a new system is going to leave you burned.

With gambling, the house always wins because casinos are for profit and designed that way. With trading, the market always wins if you're a dumbass.

I'm not trying to cheat the market. I'm just trying to simplify how you approach it eliminate a lot of ways to screw up. (Slash trying to learn how it works safely, without blowing a ton of money)

So if everyone is smart, nobody loses huh?

Nobody playing the game loses. Only people who don't understand that there is a game.

That's why I stay out of it

I didn't say that. Smart people make mistakes. Economics is complicated. The difference is that gambling is usually random and stacked against you. The stock market is inherently neither.

Everything after stat's post is rubbish

I was asking cause I really don't know

In that case I refer details to Steven, since my knowledge is limited to what I picked up from my dad's trading.

Buy BP.