Trading Strategies

Let's discuss some of the better known strategies experienced traders
and beginners alike can use to improve their trading results. Some of the
terms used in this section will be covered in greater detail later. Many of
these strategies apply to buy-and-hold as well as short term trading.

Patience - This is probably the most important as well the hardest trait for
most investors to learn. I can't tell you how many times I've watched a
stock make a move that would have made me money, had I just waited.
I've felt like kicking myself many times because I failed to wait things out.

Emotions - You have to learn not to panic when you witness a fluctuation
in the price of your stock. It's hard to do sometimes. You have to be wise
enough to step-up and buy when others are selling and realistic enough
to sell and take a profit when everyone else is in a panic to buy in.

Remember Bid/Ask - Always remember to watch the spreads on stocks
that trade with bid/ask prices. Stay away from stocks with large spreads.
Look for stocks with small spreads. Big spreads are an indication that a
stock is very thinly traded.

Market Orders - You should remember that when you place a market
order to buy or sell a stock you are giving your permission to buy or sell
at the current bid or ask price while the market is open. This is not the
current price at the time you give the order, it's the price when the trade
is actually made. This means that there will be times that you won't get a
price that you might expect. If the trade you want to make is a large block
of shares (say 1000), part of you order might fill at one price and the rest
of your order might fill at a worse price.

Market-makers set their bid/ask prices and also set how many shares the
price is good for. You might get 500 shares executed at one price and
the other 500 at another price. I don't use market orders very often. If the
price of a stock I want starts moving quickly, I might use a market order.

I never place a "buy" market order at the morning opening of the market.
It's a sure bet you'll pay the high price due to pending over-night orders,
but keep in mind that this is sometimes a good time to place a sell order.