Securities Research Services
Presents:
Getting Started
This Guide Provides the Practical Steps Necessary for Getting Started with Online Stock Trading
Opening an Online Brokerage Account
Setting Up Your Charts
Learning How to Order
Knowing How Much to Buy
Table of contents
Preface
1Opening an Online brokerage account
2Setting Up Your Charts
3Learning How to Order
3.1Basics
3.1.1Day and GTC orders:
3.1.2Limit orders:
3.1.3Stop-loss orders:
3.1.4More Order types
3.2Practicalities
3.2.1Market Orders vs. Limit Orders
3.2.2What If My Limit Order does not Fill?
3.3When do I Sell When My Stock Closes Below the End of the Day Limit Price?
4Money Management
5Where is the Market Going Next?
5.1Turning This Knowledge into Income
5.1.1Earning Consistent Returns by Taking Small Profits
5.2Professional Research
6Services
Appendices
appendix A:Ordering is not what it used to be
appendix B:The 10/2 Rule
Preface
A primary rule to achieving success in the stock market is that you have to have a plan. New traders find out the hard way that the market can be very cruel to them if they enter it unprepared. If you are just getting started we can save you a lot of time and pain here with this next statement. If you want to succeed as a trader you have to have a clearly defined plan and you absolutely cannot break your rules under any circumstances. So many traders buy a stock because they heard or read something good about the company, or they learned some new technical indicator, or they just have a gut feeling. Sooner or later, this type of trading is going to empty a trading account. For just like a casino in Vegas, sooner or later the house will win because the odds are in its favor. A successful plan will increase the odds for success and put them in the favor of the trader. This plan must be followed religiously, for the market will punish mistakes severely.
This book provides you with step-by-step instructions for setting up a brokerage account, getting the information you need to make the right decisions, how to order and how to sell, and finally how to manage your risk once you begin. With these powerful tools at your disposal and with Securities Research Services as your trading partner you will have the necessary edge you need to succeed.
1Opening an Online brokerage account
The importance of keeping commissions low, reliability, and having flexibility in how you order cannot be overstated. We have found that the following brokers meet these important requirements. If you currently have a broker, pay low commissions, and are happy with their service, then by all means, stay with what is working for you. These are merely suggestions, not recommendations.
They offer OCA orders so you could actually put a stop limit to protectagainst loss and a target sell for when it reaches the target. Once oneorder is triggered it cancels the other for obvious reasons. This wouldallow you to sleep or work during market hours without worrying about excessive risk exposure.
If you are not a resident of the USA, Interactive Brokers offers access to the US markets from virtually anywhere.
They are cheap and the nice thing about them is they have an order called"one triggers two." This allows you to set up a limit buy, which, oncefilled, triggers two more orders: one as a stop loss and one as a targetsell. This type of order is ideal for setting a stop limit and a target limit simultaneously.
OptionsXpress also offers access to the US markets to non residents, but the list of countries is more limited than Interactive Brokers.
Arguably one of the cheapest brokers out there now that they have lowered commissions on their limit orders to $7.
2Setting Up Your Charts
New subscribers are often under the misconception that specific prices a stock trades at hold significant importance. For example, a stock trading at $5 might be considered to be “trading at support” and traders are ready to sell the minute the stock trades at $4.99. The truth is that no support or resistance level on a chart is rigid but rather an “area” on the chart. In order to fully understand what you are trading you need to be able to see your stock’s performance on a good quality stock chart. If you are new to trading, we suggest taking the time to get familiar with stock charts and reading them. Spend some time playing around with your online charts, looking at your stock from different time frames. Read and study the tutorials that come free with both services below. In a short period of time you will have a clear understanding of how the charts work and how your stock’s price has a relationship with the chart. This will give you a clear edge over the majority of investors out there who ignore this fundamental tool of the stock market.
There are two competing stock chart services that you should be aware of. Both services offer free 20-minute delayed charts and offer real time charting for a small fee. Try them both out and see which one you like best. There are pluses and negatives about both services, but they are head and shoulders above the competition and both will meet your every charting need and then some.
Go to their Java charts page here to create charts that let you draw your own trendlines, overlay stock indicators, and many other useful things.
They have an ebook tutorial that provides a great deal of detail for setting up your charts, drawing trendlines, overlaying indicators etc. This tutorial will help you with both chart services with only minor adjustments when used with the prophet.net service.
3Learning How to Order
Day/GTC orders, limit orders, and stop-loss orders are three different types of orders you can place in the financial markets. This chapter concentrates on stocks. Each type of order has its own purpose and can be combined.
3.1Basics
3.1.1Day and GTC orders:
An order is canceled either when it is executed or at the end of a specific time period. A day order is canceled if it is not executed before the close of business on the same day it was placed. You can also leave the specific time period open when you place an order. This type of order is called a GTC order (good 'til cancelled) and has no set expiration date.
3.1.2Limit orders:
Limit orders are placed to guarantee you will not sell a stock for less than the limit price, or buy for more than the limit price, provided that your order is executed. Of course, you might never buy or sell, but if you do, you are guaranteed that price or better.
For example, if you want to buy XYZ if it drops down to $30, you can place a limit buy @ $30. If the price falls to $30 the broker will attempt to buy it for $30. If it goes up immediately afterwards you might miss out. Similarly you might want to sell your stock if it goes up to $40, so you place a limit sell @ $40.
3.1.3Stop-loss orders:
A stop-loss order, as the name suggests, is designed to stop a loss. If you bought a stock and worry about it falling too low, you might place a stop-loss sell order at $20 to sell that stock when the price hits $20. If the next trade after it hits $20 is 19 1/2, then you would sell at 19 1/2. In effect the stop loss sell turns into a market order as soon as the exchange price hits that figure.
3.1.4More Order types
See Appendix A, Ordering is Not What it Used to Be for more order types available at some brokerage houses.
3.2Practicalities
3.2.1Market Orders vs. Limit Orders
It is almost always best touse limit orders. Market orders can be highly manipulated, especially in thinly traded stocks. While we attempt to avoid stocks with low volume, there is no guarantee that a stock we provide will not be subject to market maker manipulation.
Limit orders will save you a lot of headaches as well. You will not be glued to your computer screen six hours a day waiting to fill your order. And, if we could add, we do not recommend the use of trailing stop limit orders. The market maker can see them and often times will drop the price down and grab your order before moving the price back up.
Note: We do not encourage the use of stop market orders which would sell your shares at market once the stop is hit, but rather encourage a stop limit order, which sells at the limit price specified only.
3.2.2What If My Limit Order does not Fill?
Gaps down do occur, but the vast majority gaps are quickly filled and would allow you to exit at your limit. There are off course those large gaps that occur in the market, but when support levels are carefully measured and all risk management precautions are taken (e.g., not chasing falling knives, entering before earnings reports, etc) it will be a rare occurrence that you will get caught in a large gap down. We have been fortunate to never experience one with our selections due to our careful planning and management of risk. Of course the market carries risk and risk management must be taken on by the subscriber as well. We do not encourage full investment in any one selection. In fact, we encourage subscribers not to risk more than 1/4 of their account in any one position. A 10-15% (larger gaps usually only occur in biotechs or penny stocks and are generally preceded by warning signs well before they occur)gap down in such an instance would only cause the loss of 2.5-3.5% of your entire account, which can be quickly recovered in subsequent trades. This keeps the probabilities on your side.
3.3When do I Sell When My Stock Closes Below the End of the Day Limit Price?
The market close stop should be activated either at the very end of the trading day, or, to make things less confusing, the following trading day if the price closes below the upper limit. The suggested mental stop is for the lower, intraday stop. We realize that not everyone can watch their stocks all day and as such it may be necessary to place a hard stop. If you have the time, or if you can set up an alert on your computer that lets you know when the price is hit, a mental stop can help since the MM can't see it and drop the price down to grab your stop (the fewer stops he sees the better).
The majority of trades that stop out do so by closing below the upper limit. We prefer this since it means that the loss is less. We try to keep the intraday stop out of range, leaving it there only to protect against an unforeseen price reversal that could cause greater damage if no stop were in place.
4Money Management
In the field of professional investing, being correct 55%-65% of the time is considered extremely good. Securities Research Services has achieved this level consistently. However, it is possible to be right 80% of the time and still go broke in the end if you don’t have a good money management strategy in place. All it takes is one or two big losses to wipe out all of your hard-earned gains. Managing risk has always been our top priority when considering which positions to recommend to subscribers. On first glance, it may not appear to be a glamorous concept, but we operate under the theory that if you protect your trading account by employing risk limiting factors into your trading strategy, that profits will take care of themselves. The goal here is continued and consistent success over time. Hitting home runs feels good, but if you end up giving back your profits on the next three or four trades, they don’t get you very far. So, before you open your next trade, check through this list and see if you are doing everything you can to effectively minimize the risk you expose your trading account to.
- First, understand the cycles of the market and only open trades when the market is trading in the direction of your trade. Ask yourself, am I opening and closing my trades at the optimal points in the market cycle?
- Second, if you can help it, don't hold into an earnings report or other announced event that will occur after hours. You cannot control the outcome in these situations and it is better to miss a potential jump in lieu of getting hit for a potential loss.
- Third, buy where risk is manageable. In our reports we tell you where support levels are and where a breakdown could potentially occur. Buy as close to support as possible.
- Finally, manage your trade account. To manage risk effectively you need to limit the amount of risk you expose yourself to with each trade. You should never take more than a 2%-5% risk (ideally 2%). For example, if we recommend a stock that has support at $1.80 and you make a purchase of 1000 shares at $1.85, your risk would be .05. This is because you know that you will exit if the price will close lower than $1.80. .05 x 1000 = $50 + commission. This would be a reasonable trade for you to make at that price since you would meet the 2% rule. If support is at $1.80 and you buy at $2, however, you could not manage risk effectively since you would have to take a $200 (or a 10%) loss before you would find out if the stock has really broken support or if it’s just moving down on market noise. Read more about managing risk to 2% in Appendix B, The 10/2 Rule.
5Where is the Market Going Next?
Making money consistently in the market requires an understanding of the market trend. Those who do best look at the market objectively and invest in the direction of the trend. They don’t try and guess where it might go next, because they just don’t care. Whichever way the market trends, they follow it.
Understanding this very important concept can take you a long way toward consistent profits. Those who ignore this principle are likely suffering a lot of pain now as they wait and hope for their stocks to turn around.
5.1Turning This Knowledge into Income
What is the single most valuable commodity in the market today?
The answer is easy: The ability to predict future market direction. If you can do this, you can be immensely rich.
Of course no one can predict the future direction of the market; at least not perfectly. This does not mean that the market does not leave clues for those who know how to read them.
5.1.1Earning Consistent Returns by Taking Small Profits
Applying this strategy the Securities Research Services short term trading record here, it is possible to see how consistent returns can be achieved by taking small profits and cutting losses very quickly.
Click here to see how in one month $10,000 could have produced an income of $1,726 by taking 10% profits and limiting your losses to only 2%.
5.2Professional Research
While the 10/2 strategy of taking small profits and limiting losses has produces very good returns over time, it is important to understand that it cannot be applied blindly to the market. Unless you carefully measure your entry and exit points, take into account the general market direction, analyze institutional interest, analyst upgrades, downgrades, and a number of other factors, what looked on paper to be an easy strategy to apply quickly becomes quite difficult.
Professionals at ProfitWaves research the market and analyze the conditions thoroughly before making a select few recommendations that have the greatest promise. Members are then provided the key factors that allow them to utilize this strategy in a way that both works and that is profitable.
6Services
With Fortis Group, members always have the three key factors that help them to be successful: Where to buy, where to sell, and what to do if something goes wrong.
At Securities Research Services we offer two investment strategies.
Short Term Strategies:
Make your money work smarter, not harder
►We let you know where to buy, sell, and what to do if something goes wrong
►Lock away quick profits (about 10%)
►The goal is to always keep your money growing, never letting your account slip backwards
Long Term Strategies:
Your money works for you even if you don't have time to watch it every day
►Enter in a developing trend and exit only once that trend breaks
►We notify you via email when it is time to exit
►Very little time is required on your part
To learn more about these strategies and how you can profit from the click here.
appendix A:Ordering is not what it used to be