Rule #1: Never, never, never ever trade with real money until you have successfully “paper traded” at least 75% of the time.
Glossary Term: Paper Trading – Simulated trading on paper.
Glossary Term: Cost Basis – The IRS defines the cost basis of a stock as:
Cost Basis = Selling Price – (Purchase Price + (Buy + Sell Commissions))
When trading stock you must always remember how much commission you pay to buy and sell the stock.
Example: If you buy 100 shares of stock for $3,000 and sell it for $3,010 you might think you made a $10 profit. Not so. If your Round Turn commission is $20, then, you really have a $10 loss.
Glossary Term: Round Turn Commission – The Buying Commission + the Selling Commission.
You will often see the advertisements from Trading Brokers that say, “$$.$$ per trade”. Each Buy and each Sell are separate trades and therefore, a commission is charged for each one.
Yep, you guessed it. The Broker gets his commission, both in the Buying and Selling, whether you make a profit or not. A real Bummer!
(You will need a book or two that explains the structure of the stock markets to include an understanding of Market Makers, Specialists, and ECNs. A good free source is your public library.)