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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The stocks and shares market is not for the feeble hearted. If you are entering the market for the first time, then it would be a good idea to take a backseat and observes the experts at work. You could also own an offline account and begin trading. How you fare in these and the amount of profit you make will determine how prepared you are to actually foray into share trading.

Relying on luck alone is not going to help you when it comes to professional share trading. You need to know what you are doing. This can be done by detailed research in the market. Look into all the political and as well as economical causes that affect the market. Once you are able to judge how each of these individual factors determine the functioning of the market, only then will you be able to get somewhere. There are several buzz words as well as on-the-floor jargon that you need to be familiar with when launching into share trading.

While you may get your tutelage under the best in the industry, when you are actually trading, you can consider yourself to be on your own. Once you are familiar with the trading jargon, you will be able to get an upper hand in terms of knowledge with what is going on with each of the stocks. Sometimes, the terms can be confusing and you will have to rely on your better judgment. Such decisions have to be taken rationally so that you don't end up in a situation of extreme loss unnecessarily.

Everything that happens politically as well as economically in a country can affect the way the markets function. Therefore it is a good idea to keep constantly abreast of what is happening in the world. For example, when companies release their quarterly reports and if you find that they are working at a loss, it would be a good idea to get rid of their stocks till they recollect themselves in the next financial year. But if a start up company is able to make a huge impact in a short time of being on the market, you know that they stand a good chance in the coming financial year of earning you a profit. Share trading is about guesswork and smart decisions, both of which you need when you decide to make a foray into this volatile world.

David S Fernández is a freelancer writer who writes different trading and investment articles including Forex Trading and CFD Trading. CFDs are a financial instrument that give you leveraged trading power and flexibility.

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The term Day Trade, or, Day Trader is a reference to a person who will leverage large amounts of capital in return for generally a small return and close the position out by the end of the day.

In general, if a trader has a large amount of capital invested into one of the larger Share Broking Companies, they will be allowed to invest more than the capital that they have into a stock, or, stocks on a daily basis as long as the position, or, the shares are sold by the end of the trading day. If there has been a profit, all well and good. If there has been a loss at the end of the day, then the trader must have sufficient funds to back this loss up, in his or her account.

In my experience of day trading, I'm probably about even, or slightly ahead.

Lessons to be learnt are:

Make sure the stock you are holding has sufficient daily turnover so that your broker is able to exit it at any time in an emergency run down of the stock.

For example, if you are investing on a day trade say $100,000. The stock should have a daily turnover of at least two to three million dollars so that when you do exit then your $100,000 investment doesn't effect the price dramatically. Of course, your broker would possibly only offer your stock back in say $20,000 allotments until the $100,000 is completely cleared, but, as I said, if there isn't sufficient turnover then your $100,000 could dramatically effect the price, particulary if there is an avalanche of selling.

Mostly though this wont be a problem as Day Traders usually spot a stock that's rapidly moving and will all jump on it likes bees to honey.

This is where you should be very careful at the same time. Day Traders can manipulate the price and cause huge panic in the stock, for their own advantage. For example, if the stock has run from say 50 cents to 56 cents in a few hours, day traders can put a risky false offer of a larger amount than what has been trading up for sale at say 58 cents to try and spook the market to rapidly sell. As quickly as the offer has been placed there, it is removed when selling downwards occurs enabling this trader to take advantage of a lower price.

On the other hand, the same tactic can be applied to get the price to move upwards. That is if the stock is trading at say 53 cents and there has been a bit of a lull in buying and selling of the share, then a day trader may put a buy offer of a huge amount of shares in at say 51 cents, invigorating the share once more into action as it gives the share traders confidence that the stock has underlying buying support.

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