Share trading has become very popular lately. Many people see it as a great way to make some extra income each month. Though that is true, what most people don't realize is just how risky share trading can be. Whenever someone makes a dollar, that means someone else has just lost a dollar. It's a zero sum game. Competition is extremely fierce. And if you don't know what you are doing you will get eaten alive. Here are a few share trading basics that will help you get started the right way.

Prepare Your Exit Strategy In Advance

Before you make your first trade you should know at one point you will sell a stock if it starts to lose money. Holding on to a stock for too long can often times lead to huge losses. Truth is, no matter how knowledgeable you are, you will not always be able to predict which direction the price of a stock will go. Smart traders get rid of losing trades as soon as possible. So if your trade losses more than 3 percent, sell it off immediately.

Avoid Trading Cheap Stocks

Stocks that have a low share value are extremely unpredictable. Add that to a low average daily trading volume and you are in for a tough day of trading. Big institutions such as banks will usually buy high priced stocks. When they do, volume almost always increases. The increase in volume makes prices more predictable and that gives you a big advantage. If you know what you are doing, you can make a nice profit when this happens.

Understand Trends

I once heard someone say that the trend is your friend. This is a very true statement. Trends are nothing more then random price movement. But for someone who understands it, it is an opportunity to cash in. Occasionally these trends will happen when investors buy and sell over an extended period of time. When this happen prices become more predictable and again giving you the advantage. There are many ways to determine if a stock is trending. One of the easiest is by using a 50 day average indicator. If the 50 day average of a stock is rising, then there is a good chance it is an upward trend.

These are just a few basics to always remember when share trading. Just know that it might take some time for you to make a nice profit. But if you keep at it, you will be successful.

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