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Stock Market for Beginners Charting
 
If you are a beginner to the stock market my word of advice is to take care ! The stock market is not a level playing field, it is highly tilted in favor of the insiders. As a beginner there are some basics that you need to understand before parting with your money. Firstly, you need to understand that the stock market and therefore stock prices are driven highe or lower by professional traders for reasons of their own. It may even be the case that there are certain stock market insiders who drive the stock market up or down based on nothing more than a whim or a desire to cause everyone else to lose money.

If you are not Warren Buffett you can only hope to compete if you have a basic understanding of stock charts. Professional traders use them all the time so you need to understand what they are seeing when they look at them.

So, where to start with charting ? The most basic aspect of a stock chart apart from whther the price is heading up or down is the concept of support and resistance. Some people trade shares on the stock market using nothing more complicated than this basic notion.

Stock prices will often move down to a certain point on the charts before turning round and moving back up again, if you knew when it was going to turn round then you could make some money by buying the stock at that point. This low price is known as the support level. The high point is called the resistance level. Stock prices often bounce around between this support level and the resistance level - if you can spot this in the stock charts then you can take advantage of the situation.

When a stock bounces around between the resistance level and the support level it is said to be in a trend. The aim is to buy it when it reaches the bottom of the trend and sell it at the top. This stock trading stragey does not bring in enormous profits in one go, the aim is to make around 7 - 10% profit over and over again.  Once you have made a profit you sell the stock and look for another one that is following a similar trend.

It is very basic, but the aim is to make money not to devise complicated strategies for trading stocks.  The trick of course is to finding a stock that is following a predictable trend.

You must also limit your losses. If the stock you buy starts heading down instead of up then at some point you need to get out. You do this by setting a 'stop loss' - i.e. a price at which you automatically sell. Your 'stop loss' should be around 3-4% below your buying price.  This way you have the possibility of making a 10% profit but are only risking a 4% loss. The stock market, whether for beginners or experts, is all about risk/reward ratios. If the risk is too great then you don't do the trade. Above all a stop loss is designed to make sure that you don't lose all your capital in one trade !

So to apply this basic stock trading strategy you need to look at the stock charts and find a stock that is following an upward trend and where you can make a minimum 7% profit. Then identify the support level and buy the stock when it falls back to at or near the support level. Don't buy all your stock in one go, buy half of what you intend to spend then watch the stock to see if it starts moving up. If it does start moving up then buy the other half.

If it starts to move down then sell up when you have lost around 4% of your money - in stock trading it is all right to lose battles as long as you don't lose the war.

How to Make Money Trading Breakouts on the Stock Market

When a stock or an index has been trading sideways for a while one strategy can be to try and trade the stock when it breaks out to the upside or downside. This strategy may seem sensible but it is in fact quite risky, as very often the break out fails and you find yourself having to sell at a rather significant loss. The better strategy is to trade just before the breakout but at a time when you think a breakout is about to happen.

How do you know when a breakout is about to happen ? Well, watch the stock charts- if it moves up to the resistance level faster than it moves back down then that is a sign that the breakout may be coming. Each time the stock price moves back down it needs to finish higher than the previous pull-back and the volume needs to be lower, on the 2nd or 3rd pull-back youn can buy at the bottom and wait for a breakout through the resistance level. This way if the breakout fails you can get out with a small profit or at breakeven,rather than actually losing mney.

The aim is always to reduce risk and increase the percentage of making a profit.

This is not how Warren Buffett invests his money of course, but we don't all have the patience and acute financial knowledge that Warren Buffett has. Trding using stock charts is also a valid method of trading but you need to understand the signals when they arise and how to trade them !