How much money can I make in online stock trading?

You can make money in online stock trading as long as you are following a trading strategy and don’t trade emotionally. Whether you are position trading, swing trading or day trading stocks, your goal remains the same: to predict uptrends when buying stocks and to predict downtrends when short selling stocks. The kind of the trading strategy only dictates the time frame you are supposed to be holding the stocks.

Position trading

Position trading in online stock trading refers to trading in the longer time frame stock charts and holding a position for months or even years! Position trading is quite often similar to investing, as investments need time to pay off and it’s not the quickest way to make money. Investors or position traders make money when companies perform exceptionally for a long time, leading their stocks to trend upwards for months. Apple stock is a great example when it comes to position trading. Traders who bought AAPL shares for $7 a piece back in 2003 have now made 100 times their initial investment, as Apple stock price recently hit $700!

Wonder how the nine stocks I picked for position trading in 2012 are doing? Check them out!

Swing Trading

Swing trading is getting quite popular lately as an online stock trading system. Usually swing traders hold on to their stocks for days and trade the price swings during a trending market. PepsiCo stock’s uptrend in 2012 must have offered plenty of opportunities to make money by swing trading the stock.

Let’s see some profitable swing trades of PEP stock:

1. Buying for $65 a share in April and selling at the recent resistance level ($66.5) – 2.5% gain.
2. Buying at $67 during June’s pullback and selling at resistance level ($69) – 3% gain.
3. Buying at $70 on filled rising candlestick in July and selling at new daily low ($72) 5 days later – 3% gain.

Swing trading can also be applied in downward trending stocks, such as Intel.

1. Selling at the resistance level ($28) with a stop loss at $28.5 and buying to cover at the support level ($25) would complete a 6-1 reward-to-risk ratio trade. You would have risked $0.5 per share and would win $3 per share! Thus, if you short-sold 200 INTC shares, you would have made $600 by risking $100.
2. Short selling at $27 and exiting at $25 during August’s downtrend – 7.4% gain in 10 days.
3. Shorting at new low ($24) would let you hold onto your position even until today, one month later and already gain 10.5%!

Day Trading

Day trading stocks can be quite risky but rewarding as well. Just imagine you are position trading or swing trading in a time frame of 7 hours. You are not allowed to hold stocks overnight and you continuously buy and sell shares in a matter of minutes or seconds! The obvious question is how much stock prices move during a day, to effectively be able to extract substantial gains by day trading. A fine example would be my day trading experience in August, when I made $1,000 by trading PSX stock on the market’s open. But here is Glu Mobile’s stock chart of Friday’s trading session.

The stock found support in the first 10 minutes of trading at $3.00 and climbed up to $3.47 four hours later. Day traders who bought GLUU shares for $3 and traded out at $3.40 increased their investment by 13.3% in just 4 hours. In dollar terms, if you bought 1,000 shares at $3.05, setting a stop loss at $2.95 and sold at $3.40, you would have made $350 risking $100.

No matter the trading strategy you like in online stock trading, you can make money by trading stocks. Yet you need to first test your strategy by paper-trading it before risking real money. Sometimes you would need to set tight stop losses using the intraday stock charts or loose ones in case you are going to hold the position for days or weeks. Keep studying the stock markets and stop worrying about how much money you can make in online stock trading! Profits will come when you learn how to trade stocks.