hey everyone thanks for checking out this video my name is Travis Rossum the
creator of the master the market education that you can find link below
in the description and this is going to be the second part of the day trading
stocks for beginners series that I'm doing here on my channel so if you
missed the first part and you're brand new to trading you may want to start off
with that video first and I will of course have that linked down below in
the description okay so the goal of this series is to start from the basics of
day trading stocks and gradually each video get a little bit more complex
until you're able to actually understand what day trading is and how you can
profitably do it with simple and effective trading strategies okay so in
the last section we talked about day trading and the pros and cons of day
trading how to set up your brokerage account and we went over a few different
options when it comes to actually opening a brokerage account in the first
place and here in this video I want to start talking a little bit about trading
itself so like I briefly mentioned in the previous video there are actually
two ways that you can profit from the market most people always think of the
fact that you can profit from stocks going up but realistically you can
actually profit from stocks going down as well so first and foremost when
you're buying or quote-unquote longing or even going long that simply means
that you're buying into a stock to open a position and then later on selling
that position to close it ideally at a higher price so when you're buying
stocks the goal is to of course buy the stock low sell and high and then profit
the difference between where you bought and where you sold multiplied by the
number of shares that you traded so for example if we take the diagram here at
the bottom you can see that the green dot on the chart is where we would buy
into the stock and the red dot is where we would sell our shares so if we were
buying 1000 shares out one dollar per share and then selling those 1000 shares
later on at one dollar and ten cents per share our profit in this case is going
to be 1000 shares multiplied by the ten cents in profit that we made giving us a
$100 profit and like I mentioned this is really how most people think of
profiting in the stock market whether you're day trading swing trading or even
longer term investing you ideally want this stock to go up so you can buy low
and sell high however one thing most people
don't realize that for me was actually kind of a game-changer in my trading
because at the time when I first got started it seemed like every time I
bought into a stock it was pretty much all the way up at the top and it seemed
to fall down immediately after I bought into it so when I found out about short
selling or quote-unquote shorting or going short it really opened my mind up
to a whole new way of trading that actually allows you to profit from
stocks that are going down so when you short sell or when you're short all
you're doing is opening a position first by selling and then later on buying to
close or in other words buying to cover your position I mean the way that this
works is you're borrowing shares from your broker when you think that the
stock is going to go down and then you're selling those borrowed shares at
a high price later on ideally the stock falls down you buy back the shares they
automatically are going to get returned to your broker and you will again profit
or lose the difference between where you bought and where you sold multiply it
again by the number of shares traded okay so just like when you're buying you
still want to buy low and sell high the difference with short selling is that
you're going to be selling those shares first and then later on you're going to
be buying those shares back hopefully at a lower price so just like the example
before when we were buying the stock in this diagram we have the red dot
representing where we would short sell the stock and then later on the green
dot is going to be where we would buy the cover or in other words by to exit
our position on our short position and for this example let's say we were
shorting 500 shares at $3 per share and later on we were covering those 500
shares at 2 dollars and 80 cents per share so because we profit from stocks
going down when we're short selling in this case we made 20 cents per share
with 500 shares so 500 times 20 cents again is going to give us a $100 profit
now with that being said I do recommend that if you are brand new to trading you
stick with simple buying and selling before you get into short selling and
covering because it's best to just stick to kind of the basics and stick to one
thing before you move on and spread yourself too thin by trying to trade all
of these different types of strategies and all so with that being said short
selling is a little bit more risky than buying and selling because if you think
about it there's really no how high a stock can go and if your
short selling that means that you're losing as the stock goes higher and
higher so if you're not careful in your short selling stocks that have potential
to go very very high in front very very far in a way you're kind of playing with
fire and it's very important to be able to manage your risk while doing so to
avoid yourself from taking a big loss so now that you know the different types
of trading both long and short one thing that you're going to have to specify
before you place any order whether it be to buy sell short sell or to buy to
cover is the actual type of order that that's going to be and the order type is
actually going to have a significant impact on how your order is executed and
because of that it's going to have a significant impact on the price of your
position and at the end of the day there's really nothing more important
than the price of your position because if you're buying a stock and you have a
great execution on that order allowing you to get in at a very low price it's
going to be much easier for you to sell at a higher price and profit on that
trade okay so the first order type that I want to talk about is what is known as
a market order a market order is an order going to be executed immediately
at current market prices now personally I rarely use market orders and that's
for whatever reason I'm in a very urgent situation and I want to enter or exit a
position as quickly as possible and the reason that I don't use market orders
very frequently is because if you think about it every time you buy a stock
there has to be somebody on the other side of that trade that is selling you
the stock so if we take the example down at the bottom we have the stock symbol
TSLA for Tesla stock and if we were buying 100 shares at the market that
means were simply buying 100 shares at whatever price we can get them at so if
the current price of Tesla was at $700 per share but the closest seller was at
702 dollars by using a market order we would be buying our 100 shares all the
way up at 700 and $2.00 because that's where the lowest seller is currently at
so you can see by using market orders a lot of times you're not going to get the
best fills on your positions and for that reason again I really only
recommend using them if you're ever in a very urgent situation and you want to
quickly get in or out of a trade
the next type of order that you can use is what is known as a limit order now I
personally use limit orders on just about every single trade both to enter
in exit my trades and this is an order type that is going to be used to buy at
or below a specific price or to sell at or above a specific price now because of
that limit orders are not guaranteed to be executed in order for them to be
filled there needs to be buyer's or seller's at the specified limit price so
again if we take the Tesla example down at the bottom in this case instead of
buying at the market let's say we want it to buy 100 shares at a limit price of
$700 and let's say for example the stock is currently trading at seven hundred
and twenty dollars per share well if we're setting our limit order at seven
hundred dollars per share that order is simply going to sit there and wait for
the price of Tesla stock to come all the way down to seven hundred dollars and
we're only going to get into that position if the price is at seven
hundred dollars or less and these order types are really great for entering and
exiting positions because one thing that you're going to learn in the future of
this series here on my channel is that we can use very specific points on our
charts what are known as support and resistance which again we're going to
talk about in the future or our entries in for our exits and we can actually
determine these prices beforehand allowing us to set our limit orders to
either buy or sell and then later on we simply wait for the price to hopefully
reach our orders and fill them giving us the best chance of profit on our trades
or if they don't reach our limit price we know that the trade was simply not
worth taking and we can go ahead then and cancel our order and move on and
look for a better trade setup okay and the less order that I want to
talk about is what is known as a stop order stop order is going to be used to
buy or sell immediately once the stock reaches a specified price stop orders
are commonly called a stop loss and really what they do is they allow you to
automatically cut losses on your position when the stock reaches a
specified price and because of this this is a great way for beginners to manage
their risk because at the end of the day one thing that many people learn the
hard way is that cutting losses on your own is much easier said than done
and at the end of the day cutting losses quickly is easily one of the if not the
single most important rule to trading stocks profitably so in other words I
highly recommend using stop orders or stop losses when you're getting into
trading to allow you to manage your risk without having to do so manually and the
way that stop orders work if we take Tesla's stock for example at the bottom
in this case we have an order to sell 100 shares with a stop on quote order
selected and never stop price set at six hundred and ninety nine dollars now what
that means is if the stock gets all the way down to six hundred and ninety nine
dollars this order is automatically going to turn to a sell order at the
market and it's going to immediately exit out of your 100 shares for you and
again this can be very handy because say for example you bought into the stock at
seven hundred eighty five dollars and you know that maybe there is a level of
support at seven hundred dollars so in other words you're expecting the stock
to stay above that seven hundred dollar price so with that being said if the
stock happens to break below seven hundred dollars you know that you want
to cut your losses quickly and exit out of your position so you can set your
stop-loss order in this case at six hundred and ninety nine dollars so that
way once that seven hundred dollar price of support breaks you would
automatically be out of your position and it would automatically cut your
losses for you okay so I hope you enjoyed this video if you did please
make sure to give it a like and subscribe to the channel so you don't
miss out on part three of the series also if you want to save yourself some
time and you want to learn all of the strategies and techniques that I used to
trade stocks full time you can visit the first link down below in the description
to visit my web site master the market we have a total of eight courses
over 15 hours of trading content for day trading swing trading in long term
investing and we even have 70 practice quizzes in access to our trading chat
room with over a thousand active traders anyway thanks again for watching the
video I hope you enjoyed and I'll see you guys in part 3