| As with any profession, you must first learn the | | | | from your trading plan. |
| fundamentals; here we learn some share trading | | | | Your share trading activities may attract tax |
| basics. Most people start trading the Australian | | | | implications. If your market trading activities match |
| sharemarket with $2000 but you can start for as | | | | certain criteria set out by the taxation department, |
| little as $500 plus brokerage costs. But before looking | | | | your professional share trading could be seen as a |
| into the basics of trading shares you should ask | | | | type of "business". Please seek professional advise |
| yourself the following questions: What do you want | | | | from your accountant about tax implications and your |
| to achieve from your share trading? What level of | | | | share trading. |
| return do you expect? Do you think this level of | | | | Keep liquidity in mind when you are trading. You will |
| return is realistic? Are you prepared to strictly follow | | | | definitely want liquidity when you trade so you can |
| rules and systems in your share trading? How much | | | | easily enter and exit trades as you please, as close |
| money are you prepared to risk in your share trading | | | | to your bid or asking price. Most stocks on the |
| activities? Answer these questions as truthfully as | | | | sharemarket are liquid, but many are also illiquid. Most |
| you can. | | | | liquid stocks are usually in the top 10, 100 or 200 |
| An important basic share trading principle is the | | | | companies of the stockmarket (in order of market |
| amount of time you are willing to spend in the | | | | capitalisation) and in Australia, these companies would |
| market. Also consider the other influencing factors | | | | be listed on the ASX100 and ASX200 indices. |
| such as opportunity cost and other interest | | | | Finally, you must accept the fact that you and you |
| repayment costs. Also keep in mind that this length | | | | alone are responsible for your financial future and |
| of time will vary greatly from person to person and | | | | your share trading. You control the amount of risk in |
| there is no one correct answer. The best length of | | | | a trade and any losses must be accounted for as |
| time to choose will fit your trading personality. Most | | | | well as have a trading plan strictly followed. The |
| of the time trading stocks involves a short time | | | | share market doesn't dictate how much YOU lose, |
| frame but there are trading systems which involve a | | | | only you decide how much money you are prepared |
| longer time period. (Such traders who trade longer | | | | to lose by presetting your stop loss and the amount |
| time frames may have a multitude of reasons why | | | | of risk you are willing to place in every trade you |
| they have longer time frames: some may find it | | | | execute. The stop loss level must be determined and |
| more comfortable or others may trade longer time | | | | set in stone before any trade is initiated. Many |
| frames to minimise their analysis time) Be mindful | | | | formulas and theorems exist for differing trading |
| that you don't transform your trading into an | | | | needs, but most traders use a simple rule called the 2 |
| investment portfolio where you have let a trade turn | | | | percent rule. |
| sour and you have not followed your planned exit | | | | |