Question: I have a question about stocks and the market. New guy and I make money..?
I am super new to the game. I started with Scottrade with 10k .. 7 bucks a trade.. They seemed shocked and or judged me when I slapped my 10k cashier check down. I got into NFLX when it was at 72.. up and down caused me to lose about 600.. I got out.. I heard it was going to hit 150 .. So it did great and went back to 100 at one point. I had to get out because it was too much risk as far as it could of lost a bunch. I have been watching WEN.. BAC. then I heard of SHLD and seen it drop to less then 30 a share and wanted to get in but was scared it could drop lower after the 120 store closer. Now SHLD jumped to over 50 a share.. I know I lost. I lost on NFLX..I know. I lost on BAC.. I have been told one thing from my father which is not in the stock market at all. He said "stay away from government stocks".. I jumped into GLW and it brought me back out of a loss and into a positive of ..lets say 10,600 for now. How does this work.. I see it jumps up and people sell.. I can easily buy and sell this stock GLW.. each day for a profit. most the time. However I did it one time and I got a call from Scottrade and they said I got 1 mark for trading without settling funds. Something about 3 days.. Then I asked how do I buy and sell whenever I want.. I want to know how to Buy and sell that same day and do it over and over again. Day after day.. I think they told me if I put another 10k into it I could trade/buy/sell as much as I want. Should I be somewhere else or is there a company that is better.????
Answer:
The way I read your question is that you are probably going to take a big hit at the moment. How are you choosing your stocks? By sticking a pin in?
Stop trading and read a bit, forums, financial mags, financial press. Try and get some reasoning into what you are doing. Is this a good stock? Is it looking cheap or expensive (chart, volumes etc.).
Why am I buying this stock? Is this reasoning still holding up? Should I be selling or holding? At least have some idea what you are doing and why.
Advice for a beginner: do the opposite of what you are thinking of doing (or are being told to do), you will have more success!
Look when you trade you have a settlement date for your cash. When you sell the stock, you have to wait a few days for the funds to settle. That's just how it works, so whatever money you used to buy and sell the stock with, that money is tied up for 3 days before you can use it again. If you have money in your account which you didn't use to buy any stocks with, you can always use that money. That's what they mean by adding another $10,000 in your account. If you want to use the funds within 3 days after a sale, then either add more money to your account or invest less each time so you have some money left to cover the settlement period. If you buy $2,000 worth of GLW, then you have $8,000 left in your account. So once you sell GLW, the $2,000 you used to buy it with will have to settle so you can't use that $2,000 for 3 days. But you can always use the $8,000 since it's free cash and was never used to buy the stock.
As far as day trading (buying and selling each day for a profit), I did that when I first started trading and I was really good at it, but then tax time came around the next year and I got screwed. Keep in mind that you're paying so much more in taxes when you buy and sell stocks without holding them for at least a year. There's other things you should look into about it, just look up "downsides of day trading" or something like that.
As far as the types of stocks you pick, it sounds like you don't have the gut for taking risks. Either you don't have patience or you're just too nervous, which is more of what it sounds like. In that case I would diversify and focus on stocks that have a lot of age to them and stocks that are gradually rising each year but not so fast that it causes a lot of ups and downs (volatility). Just stocks that seem somewhat dependable over a long period of time (longer than 4 years). There's a lot of stocks out there that are both relatively safe and still profitable each year. If you spread out your money and divide it up into a few different dependable companies and one of them fails, the winnings from the others that didn't fail should cover the loss so you don't have to worry so much if one drops and you can have the patience to wait it out. Since they're all dependable companies and all in different industries, the likelihood of more than 1 failing is not likely. I think what you're doing is not going to be profitable in the long run because you're taking too many risks and even if you do great most of the time and have a knack for picking winners, the losers here and there will cancel out any winnings you have, and day trading further complicates it because then your earnings are being taxed at twice as much or more.