• Online trading may be easy, but research and preparation still prepare you better than a crystal ballInvestment image by Svitlana Boldyryeva from Fotolia.com
  
  Online trading has opened a new universe for stock-market investors and speculators. The price of entry is low, no experience is required, and user-friendly software has made research, charting and trading a breeze. But online investors, especially those new to the field, need to be well aware of the many tricks and traps that can quickly shrink their account balances.
  
  

Prioritize

• Consider your current income, assets, debts, monthly obligations and general financial situation. Don't trade stocks, options, commodities or currencies if you don't have risk capital, meaning money you can afford to lose. If you don't have sufficient risk capital, don't trade live. Use a practice account to get a feel for the market and how it moves.
  
  

Self-Educate

• Spend some time trading in a practice environment to get a feel for your personal trading style. Different investors will hold positions for different lengths of time. Some enjoy turning trades around daily; others prefer to hold positions for several days or a week. Find your preference and tune your research to that preference.
  
  

Charting

• Study the charted price movements of individual stocks or instruments. Use various time periods, moving from longer to shorter periods, to identify the underlying long- and short-term trends. Take your cue from the long-term trend and trade with it.
  
  

Entry Points

• Watch support and resistance levels. Support is the level the stock or other instrument stays above when falling. Resistance is the level at which the stock turns down on a rise. Wait for the price to reach its support or resistance point. When the price returns to the underlying trend direction after hitting its support or resistance, open a position.
  
  

Money Management

• Don't commit more than 2 percent of your risk capital to any single position, no matter how convinced you are of your trade. Always set a stop-loss, which will automatically close your position if the market moves against you. If the stock hits the stop-loss price, take the loss, shrug it off and prepare for the next trade. If the stock moves in your direction, move the stop to guarantee the position will be profitable, or at least break even.