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trading stock tips , As a new investor, be prepared to take some small losses.

Always cut your losses at 8% below your purchase price. (read our stop loss orders guide)

Persistence is key when learning to invest. Don’t get discouraged. Learning to invest doesn’t happen overnight. It takes time and effort to become successful at it.

When getting started, it is important that you pick the right full service or discount . If you use a broker, make sure he or she has a good track record. As a beginner, set up a cash account, not a margin account. It only takes $500 to $1,000 to get started.

Experience is a great teacher.

Avoid more volatile types of investments, such as futures, options, and foreign stocks. Concentrate on a few, high-quality stocks. There’s no need to own twenty or more stocks. Don’t get emotionally involved with your stocks.

Follow a set of buying and selling rules, and don’t let your emotions change your mind (see 50 Ways You Know You Are An Emotional Investor).

Don’t buy a stock under $15 a share. The best companies that are leaders in their fields simply do not come at $5 or $10 per share.

Learning from the best stock market winners can guide you to tomorrow’s leaders. (navigate our stock chart examples archives) Always do a post-analysis of your stock market trades so that you can learn from your successes and mistakes.

A combination of fundamental and technical investment styles is essential to picking winning stocks. Fundamental analysis looks at a company’s earnings, earnings growth, sales, profit margins, and return on equity among other things. It helps narrow down your choices so that you are only dealing with quality stocks. Technical analysis involves learning to read a stock’s price and volume chart and timing your decisions properly.

To make big money, you have got to buy the very best companies at the right time. Strong sales and earnings are amongst the most important characteristics of winning stocks. Buying a stock as it is coming out of a price consolidation area or base is crucial to making large gains. Bad Arolsen (Arolsen, Germany .

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@trading stock tips, why always cut your losses at 8%. If one trades high risk markets which are volatile then one may need stop losses of between 10% to even 20% so that one does not get stopped out on any whipsaws.

Also why not buy a stock under $15 a share. If one wants to trade or invest in small caps as 'Elephants Do Not Gallop' then this does not make sense. 

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I think the target audience forthe article is given in the first line 'As a new investor ...' so not really aimed at a savvy, experienced investor like yourself @TrendFollower. In which case the advice is probably quite sound, cut losses early, keep away from the highly volatile and also keep away small caps with their very low volatility.

We often get newbies getting excited about the AIM market on the forum, especially since the LSE 'jazzed up' it's AIM page but any research on the market usually brings up the advice that AIM stocks are not really suitable for the inexperienced. Only the few actually take off big and your capital will more often than not get trapped in any of the many that don't. 

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Thanks @TrendFollower, I was wondering what your thoughts were on the inexperience tackling the AIM, should they even try? Seems like a tough learning curve, especially on limited capital as is usually the case with those just starting out.

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@Caseynotes, my thoughts on the inexperience tackling AIM is that they should not without having a clear strategy on how to tackle such a monster. Make no mistake there is money to be made on AIM. Even the most rubbish shares can move double digits in a day on just a 'flimsy' RNS. 

One strategy which I have used in the past is to buy those AIM shares that release what I deem as positive news at 7:00 am via an RNS. I use Investigate for this and it is free so it will not cost a penny. I have provided the link below.

https://www.investegate.co.uk/Index.aspx?sector=AIM&date=20180905

I then sell by about 3:00 pm to 4:00 pm so at least 0.5 to 1.5 hours before the market closes. Another strategy I have adopted has been to merely identify trends and ride those trends with trailing stops in place. Stop losses are a must on AIM shares. Clear risk management is needed. I have used Sharescope to aid me in this. I have again provided the link below.

https://www.sharescope.co.uk

One can profit from the rubbish on AIM as long as one remembers not to worry about fundamentals, balance sheets, profits, turnover, etc. There are many shares which go up high double digits in a month and the fundamentals are appalling. That can be put to one side and to just trade based solely on price action. One must not get emotionally attached to any of the rubbish companies on AIM. Just trade them based on price action, take the profits or losses and then move on to the next. Patience is required too. If there are no trends that have been identified or any opportunities established then one does nothing on AIM. Sometimes doing nothing is better than doing something for the sake of doing it. I hope that makes sense!

Now the question is whether someone new to investing or trading could be so disciplined and trade the rubbish on AIM? Yes @Caseynotes, it is a tough learning curve but if one is willing to take on such risk and manage that very risk then there are huge possibilities. The limited capital could be an issue with trading fees so one may have to have smaller positions initially until the capital buffer is increased or waiting until they have enough of a 'war chest' before they begin. Also their age will be a factor as this may determine their risk tolerance.

It all depends on what someone's risk tolerance is. If it is not very high then I would seriously encourage them to avoid AIM as it is for high risk investors and traders. They must have a clear plan, discipline to execute any strategy they are going to adopt and be prepared to make plenty of losses.

There are tax benefits for investing on AIM and I have provided the link below.

https://www.londonstockexchange.com/companies-and-advisors/aim/publications/a-guide-to-aim-tax-benefits.pdf

AIM gets a lot of bad publicity and rightly so but one must not be scared or worried about AIM. One must be strong and find those opportunities to make as much money / profits as possible in the shortest time possible. AIM certainly provides this opportunity in abundance if one is willing to put in the hard work of researching to find those companies and putting in the time required to identify any such trends that one could follow. 

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Thanks for that @TrendFollower, great post. I've never actually traded on the AIM before so was keen to get some idea of what it's actually like. My impression has been that it is a market where you need to spread yourself thin and wide to have any hope of netting the 'next big thing'. The other concern was, looking at some of the company's charts, the high frequency of gaps and poor liquidity a lot of the time. It's one thing to want to get out but another to be actually able to do so at anywhere near your pre-selected point. These are some of the warnings for the inexperienced that are often tagged on web sites concerning AIM but many seem happy to ignore them and only consider instead the promo material of it being the fastest growing market. The promo material neglects to state that it probably has the highest dropout rate of any market as well.

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@Caseynotes, trading on AIM is hard, make no mistake. I have never looked at AIM as getting the next big thing. ASOS is the most famous big thing on AIM. Some of my biggest profits on AIM came from the junk companies like Quindell, Globo and Monitise and none of them exist today as they were then. They all failed but the share price appreciation was majestic. 

Yes, liquidity is a serious issue but I have never had any major problems exiting. Maybe it is the types of shares I am selecting. I tend to look at both the price action and volume and monitor them once on my watchlist to see how many shares are being traded daily. Traded volume can be a good indicator. I tend to avoid those shares regardless of the trend where the traded volume is scarce. I would imagine these would be very difficult to exit from rendering any exit strategy as more or less useless.

The warning you mention are very serious and real warnings. One must remember that a lot of companies on AIM fail. They list on AIM to raise capital. They tend to be newer companies that have grown from start up stage to growth stage but still very small. They are nano cap companies so smaller than micro companies which themselves are high risk so I would define nano caps at ultra high risk. However the returns on a few of them are simply unattainable on the other markets in London.

@Caseynotes, there are lots of OEICS / Unit Trusts (Investment Funds) which invest in UK micro caps. I am sure you have heard or come across UK Smaller Company funds. You may wish to look at UK Micro Cap funds. 

The ones I have invested in for many years are as follows:

  • Marlborough UK Micro Cap Growth
  • FP Octopus UK Micro Cap Growth
  • Liontrust UK Micro Cap

I still hold all three of these funds along with many other funds and I invest in such funds on a monthly basis via Direct Debit. I treat such investments as a way to create wealth over the long term and I am a high risk capital growth investor. I treat the investments as the same as if I were paying a mortgage on a monthly basis. I take advantage of 'cost pound averaging' and then only make lump sum investments on any major corrections or major downturns such as recessions or financial or political crisis where stock markets crash or seriously go down. 

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Hi @TrendFollower and @Caseynotes (chat wont let me tag you??)

As always thanks for the insight and details.

Do you guys know of any stock scanner like FinViz etc to search through EU and UK stocks? My research only basically says no to this question.

The reason I ask is because since you guys gave me some great advice recently, my trading has improved in that I am more accurately spotting trades with a higher success rate. Still not 100% profitable but I think this is down to over trading (trying to force trades and setups).

At the moment my pre-market research involves clicking through all charts on EU 50 and FTSE 100, so probably not very efficient!

PS I have found some success in trading channels, MA cross overs/divergence and direction of Bollinger bands and placement of the share price in the Bollinger band.

So I am looking for a scanner that can potential provide me with the basic filters (trade volume, volatility ratio etc) and then I want to scan for cross overs etc.

Thanks as always!

 

Edited by AbDXB1345
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@AbDXB1345, have you tried looking at Sharescope? It is brilliant at helping to identify trends in stocks using moving averages, etc. The link is within one of my previous posts on this thread (if you look upwards).

 

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17 hours ago, TrendFollower said:

@JamesIG, do IG offer Micro Cap funds within IG's ISA or IG Smart Portfolios?

Hey @TrendFollower - Some of the higher risk portfolios have exposure to the FTSE 250 but we don't have anything outside of that (no AIM trackers or funds).

As a side note, I have a feeling that risk adjusted returns for the AIM market as a whole are less or similar to the FTSE main indexes. Don't quote me on that though - I'll ask our portfolio managers to have a look later on.  

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