Stock Markets Exposed
stock question opening account?
for a newbie in stock trade should i open strictly cash option have done before. Need simpliest stock trading tools cash ok? forget margins etc?
Public Comments
- Yes, cash account. Try Zecco for free trades if you are just starting York www.yorkinvestmentreport.com
- Definitely forget margin. Employing margin provides "leverage" which is to a great extent what got most of the banks into the trouble that they're in. When you employ margin, you borrow money to buy more stock than you could otherwise afford. Let's say you have $10,000. If you borrow $10,000 from your broker, you can buy $20,000 worth of stock. If that stock goes up 20%, you've made $4000 profit ($20,000 times .20). Compared to your original $10,000 investment, though, you're up 40% ($4,000 profit divided by your original $10,000 investment). However, if the stock loses 50% (which is VERY common right now) YOU HAVE LOST EVERYTHING ($20,000 minus 50% equals $10,000, which is what you still owe to the brokerage firm). If, on the other hand you had bought the stock with your $10,000 cash, you're down $5,000 but you can wait for it to recover.
