Your Questions About Paper Trading Stocks

James asks…

Can anyone detail for me their trading strategy?

Anyone want to offer up how they go about trading? What are the key indicators you look for? What factors are a make/break deal for whether you trade a stock or not?

John answers:

Hi Brian,

When we talk about TRADING, I usually take it as future & option trading. It is always better to buy & sell stock options instead of buying and selling direct stocks. The reason is very high hold time to earn good amount (in %) of profit. E.g. You may need to hold a stock for 2-3 years or more to get its value doubled (for you to earn 100% profit). So I refer direct stock trading as an INVESTMENT rather than trading.
Wherein option trading will earn 100% profit just by merely 5-6% movement of the under laying stock. Another good thing in options is you can earn profits in both up & down trends by buying calls & puts respectively.
There are various technical indicators available to find out current & future trends of stock price movements. Stochastic, MACD, RSI, CCI are most commonly used indicators among over 100 indicators available. No any single indicator is capable of generating BUY & SELL signals. So it is recommended to use a combination of multiple indicators to take trading decisions. To do this the knowledge of Technical Analysis is required.
There are some websites which do this analysis part of their own & provide buy & sell signals (paid or free). I suggest you to try the free option trading signals for Dow 30 stocks & the Dow index itself. Do the paper trading initially & follow them if found profitable.


Wish you a very profitable trades,


Charles asks…

Can someone recommend an online stock trading service?

that allow trading of penny stocks? I have a number of accounts already, but I cannot buy penny stocks. This is just something I want to good around with for kicks.
goof around.. not good around.

John answers:

You can trade these through Ameritrade as well. If you are a more typical retail trader, this would probably be a better choice than Interactive Brokers, Lightspeed, and similar firms whose pricing and platforms tend to favor high-volume traders and usually charge on a PER SHARE basis, giving you quite a whopping bill if you trade 1,000,000 shares of a $.0001 penny stock. Ameritrade, on the other hand, has flat fees per order regardless of the number of shares traded.

Also, my suggestion assumes that you’re not trading these in response to email spam, or else you’ll be doing little more than supporting the lavish lifestyles of the Pink Sheets fraudsters. In fact, all Pink Sheets stocks are quite risky, so you may want to “paper trade” (or trade without real money) your strategies first; many brokerages have features that allow you to test your strategies through their platforms.

Richard asks…

What happend to the stock of defaulted company?

I see they are still trading in the market with little value. Is it dangerous to trade them?
I mean, it is still on the market. Like Lehman, they already defaulted but the stock is still traded around 0.20. So you can buy them a lot now and make a quick profit with a little volatility. What is the negative side on this?

John answers:

Are you referring to buying shares of Lehman….they’ve defaulted so why would you want to buy them…they are useless. I don’t see how you could ever make a quick profit….I never see them going back up. Lehman Bros. Is never going to be Lehman Bros. As we know them again. I never see them making a profit. I’d steer clear of this one unless you need some toliet paper.
Peace & Love 🙂

Betty asks…

What’s the best and safest way to get started in the stock market?

I want to start trading stocks but I’m unsure of the best way to start and how to get set up for trading from home.

John answers:

Before you spend $0.01 on any investment, you must know what you’re doing, why you’re doing it and how to do it. Before you invest in any security, the first investment you should make is in yourself, and the best investment you can make is by educating yourself. Start by reading “Investing for Dummies” by Eric Tyson

To be a trader you must first learn how to invest. You must know the products and the markets in which they trade, how security transactions are cleared and more importantly you must know the rules that govern those products and markets. So you must know what you’re doing, why you’re doing it, and how to do it. .

Here’s a list of books you should consider, at least read half of them
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered, by Gallea
How to Trade in Stocks, Jesse Livermore
Millionaire Traders, Lein & Schlosberg
One Up on Wall Street by Peter Lynch
Reminiscences of a Stock Operator, Edwin Lefevre
The Disciplined Trader, Mark Douglas
Trading for a Living, by Alexander Elder
Trading in the Zone, Mark Douglas

And when you think you want to trade, try some paper trading to test your skills without spending you money

Before you enter your first order you need to address four major policies and have very strong discipline to follow them
1 – You need a written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself. Always use stops either to protect you on the down side or to lock in profits on the up side. Never trade on emotions, when emotions get involved walk away. Don’t try to out-smart the market, you’ll loose but if you always take what the market is willing to give you, you’ll be successful. Other words, you don’t trade against the trend since the market is always right. And NEVER trade on emotions, once you let emotions in your trades you will loose
2 – A written money management program is essential. Remember never invest 100% of your capital into any one security and never have 100% of your capital invested. Never go into a trade without knowing when and where you are going to get out of it. Never let a loss on a trade get greater than 8%-10%, always take you loss and walk away – don’t loose more than you need to and don’t be afraid to take the loss. Remember you never can get hurt taking a profit. Never average down, but you can average up.
3 – You must have sufficient trading/investment capital. Use your own money, there’s no need to go into debt so that you can trade and/or invest. Margin can be used but only with restraints, never let the account wall below 45% equity. Unless you fully understand margins you should not use it.
4 – A full and complete understanding of the rules & regulations of the industry. If your going to play in the game be sure you know the rules of the game and always follow them.

Unless you are willing to study and follow the above you will never make it as a trader. To be successful as a trader it takes work and constant study of the markets and the products traded in those markets, there is no easy way and there’s no software packages or websites that will make your learning easier.

Donald asks…

What is the most popular options strategy?

Do most people use options for selling covered calls, writing cash secured puts, selling naked calls, credit spreads, buy protective puts, buying calls, or the more advanced options with the calendar spreads and put/call spreads and butterfly’s and condors?

I’m recommended to use covered calls as a beginning. Besides the risky naked puts, when i start using options after i use the paper trading platform for a while, what should i be using to collect premiums without the desire of having to be forced to buy the stock?

John answers:

The most popular options strategy is covered calls. That’s because it’s easy to understand and is the most conservative. Charles Schwab (online broker) has said (in the WSJ) that 4 out of 5 of their option-enabled accounts trade covered calls. TradeKing (online broker) has said that writing weekly covered calls is the #1 most popular trade among their retail account holders.

If you are starting out then, yes, start with covered calls. Most brokerage firms have different level of permissions required for options trading and level 1 (the first level everyone gets) has covered calls along with buying options long. After you have some experience they may give you permission to do level 2 or 3 options trading (which includes the other strategies you mention).

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