Learn Stock Market Investing Basics

Investors "buy and hold", traders "buy and sell". While that may be overly simplistic, it's essentially how it works. So, what's up with trading? Why does it seem so alluring, and can you really make any decent money doing it?

For the most part, and for most people, the answer is "No". The only people who make a consistent profit trading stocks, rather than practicing investing strategies, are those who treat it as a business and have the time, skills, discipline, and resources that are necessary to be a successful at trader. Most everyone else fails. Stock market investing, on the other hand, contains a built-in goal: "Invest".

Although the market often trends down for days, weeks, months, and sometimes even years, the overall direction of the stock market has always been up, and it is likely to continue in that direction unless something very scary happens in the world.

While traders try to "time" the market by selling stocks when they think that the market has peaked, and buying back when the trend starts to reverse, it really isn't that easy to predict. As a result, billions of dollars are lost each year by market "timers" who got it wrong.

One old but relevant study examined the returns for the Standard & Poor's 500 between 1926 and 1987. This study found that the S&P 500 returned, on average, about 9.44% during the 62 years from 1926 through the end of 1987. But that wasn't the interesting part.

What was really telling happened when they looked at the market return on a month-by-month basis. In the 744 months comprising those 62 years, nearly 100% of the overall increase in the market occurred in just 50 months!

Imagine being a stock trader and trying to time the market in that scenario. If you missed just 50 of the best performing months out of the 744 months, your average annual return would have been 0%!

Another thing that they discovered was that most of each year's gain usually happened in just one of the 12 months each year. Analysis showed that the market gained an average of 8.68% during the best performing month in each of the 62 years. On the other side of the equation, the market advanced just 0.76% during the other 11 months of each year.

Investor would have been immune to all of this. Traders, however, had 12:1 odds AGAINST timing the market moves correctly each year during the study period!

Selecting A Good Stock Market Trading Software

There are so many different stock market software packages on the market that you could try a different one, every day of the year, and never run the same one twice.

Many professionals use some type of software to keep their emotions in check and to enable them to focus on their strategies while avoiding the effects of fear and greed.

In general, stock market trading software can help you in the following areas:

• Identify Channel Breakouts
• Generate high probability mechanical buy/sell signals
• Control your dollar risk
• Forecast new tops and bottoms with great accuracy
• Reveal trading trends for any time frame
• Curb your tendencies toward Fear and Greed

Software has no emotions. It doesn't love or hate the stock that you own and it doesn't want to get rich. It simply crunches numbers and tells you what it "thinks" about when to buy, sell, or hold. And while it is not flawless, it's a lot smarter than most of us are.

Trading Software is not really a necessity if you are investing in stocks and will be holding them for long periods of time. If, however, you are day, swing, or position trading, then it is an absolute requirement for you to be able to watch every up and down ticks, monitor your short positions, and stay on top of your stop loss settings. This is where trading software excels.

Before selecting a software package, download and try it out first. If the program that you are considering doesn't have a free trial, or a 100% money-back guarantee, then pass and look for another.

Although there are software packages that specialize in one particular function, such as providing real-time stock quotes, for example, you would be better off to select an all-in-one package that provides everything you need to make informed decisions. As a minimum, your software should provide the following:

• The opening price of the day in each market to determine price direction.

• Telltale signs in the market that signal a breakout to the upside (or downside if trading short) is coming and allow you to position yourself to profit with the move.

• Moving average monitoring that shows you the average price of a security over a specified time period, used in order to spot pricing trends by flattening out large fluctuations.

• Trigger monitor that will alert you to preset events such as reaching a specified price target or some other event that alerts you to take prescribed action.

• Pattern Identification so you can identify patterns in any market and use them to your advantage. This gives you a greater chance of selling at the top and buying at the bottom of the markets.

Stock trading software is a must have for all serious investors. You cannot afford to trade in today's markets without having the impartial advice and inside intelligence that a good software provides.