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As a beginner, how do we pick a stock and at the same time practice our trading skills?  I am going to explain my experience that I used on my trading and try to make it as simple as I can.

First thing is to forget about stock and ask yourself a question, which industry are you familiar with the most?  The answer will be different from person to person.  Here is an approach by common sense, It makes sense to pick the company from the same industry where your day time job is.  For example, make yourself a grocery store manager, to be more precise a fruit store.  What kind of fruit will you trade so that you can maximize profit and at the same time take less risk?  Let say you can pick either apple or pomegranate for your store, which one would you pick?  Trading apples make less profit and trading pomegranate makes more profit on each trade.  I would pick  apple, why?  Because it is much easy to sell and my risk to hold a box of apples is a lot less compared to holding a box of pomegranates.  The same theory applies to trading stocks, popularity affects the risk factor.  I would always pick a stock which has daily average volume at least 100k shares.  By pick high volume trading stocks you can inheritly lower the risk.  It is because if there ever a big sell off going on, it is easier to unload. 

Another important factor is how big is the company?  Generally speaking, the smaller in size, the higher volatility; the bigger in size, the lower risk.  In financial term, market cap means how big is the company; the financial firms categorize the companies by market cap into 3 main categories: small, mid and large.  In most cases, companies with market cap below 200 million are categorized as small cap, between 200 million and 2 billion are categorized as mid cap and any in size bigger than 2 billion are categorized as large cap.  As a beginner, I would pick a mid-cap company because the volatile is moderate and price movements are in the mid-range.  I would always avoid trading small cap because of flaws and manipulations

Verify if the simple 50 days and 200 days moving average of the stock is trending higher and the 50 days one is above the simple 200 days moving average for a period of time at least 3-6 months.   This is a very important basic skill because you can tell overall the stock is trending up or not recently.  As a simple rule of thumb, accumulate when the stock price is below the 50 days moving average or even touching 200 moving average and sell if they are above 50 days moving average.  One of my favorite charting sites is Stock Charts which provides many other technical indicators as well.  Work out your trades on paper first, maybe 3 months to get the feeling and learning along the line.  Once you have more confident, you can use real money to try it out.

Now you should have a basic idea on how to pick a stock to start with.  As a beginner, I won’t recommend to trade more than one stock at a time.  Throughout the process of learning, it is better to concentrate on doing one thing at a time as to solid the foundation and you don’t want to be confused by looking at couple stocks at a time.  Pay attention to the daily high, low, open, close and volume because more or less these figures affect the price movements in the next couple day.  Besides, you should also pay attention to the broad market as it correlates to your stock in certain level, the quantitative term for measuring the correlation between a particular stock and major market is Beta.

Here I concluded how to pick a stock without using fundamental skills:

1.     Pick a stock in your industry you are working on or the industry you most familiar with.

2.     Why and how to avoid low volume stocks.

3.     Why and how to avoid high risk stocks (small cap) and slow movements stocks (large cap).

4.     Verify the current trend using moving average 50 and 200.

5.     Why you should concentrate on a single stock as a beginner.