But you need to use wisdom and some reliable advices from experienced traders to make money out of it. And if you are solely investing because of huge dividends, you might not succeed in your online trading career. You cannot just buy stocks a day before it goes ex-dividend then the next day, sell them and receive your dividend. The shifts of stock market are unpredictable. The stock prices might go down by the amount as the dividend. For example, a certain company has a share price of 100p and its dividend payout is 5 %, when it finally goes ex-dividend, it will be reduced to 95p. So no matter how high the offered dividend is, you need to consider a lot of factors in making good profits. And going in and out of stocks just before they go ex-dividend will not work for you if you aren’t that wise.

The secret? You have to find a company that is currently oversold and is about to pay a full year dividend in the next months with stock screening software. A lot of traders often buy those that are due to make good dividends few weeks or months before the stock goes ex-dividend. And if the share is oversold, be assured that you are in a very promising position since the stock price will sure to go up.

Beginners

No one likes to say that they’ve just started in the stock market, but all of us started out at the beginning. Sometimes it’s the new guy who does well. (in my first three months, my portfolio grew 68%) and when you look to the experts, you will see that they’ve lost more money than you’ll ever see in your life time. They’re human too, but with an arrogance to them that sometimes bites them in the butt.

As a beginner you may want to just start with a “mock” portfolio and watch the stock market until you get more of an overview of how the stock markets work.

Amateurs

The amateurs are beginners with an attitude. They are the type that have been doing this for a short time and have had some positive results during that time. They look at what they’ve done in a few months and think that this whole stock market thing is easy. HA! They are also the first ones to think that they have it all figured out and they’ll be quitting their jobs in pursuit of trading stocks full-time. Once you have a good understanding of the stock market, your next step is to possibly stick with ETF’s (exchanged traded funds) or Mutual Funds. You can sit with an adviser to help make the choices that you need. Be aware though that these managers get paid by how much money you invest into their funds. The commission can range from .01%-5%, which can make all the difference in the world

Semi-pro

These are the type that got burned when they thought that they knew everything. They’ve done a lot of homework on how to reduce their losses, but they’re still not doing enough research into the companies that they want to invest. What they do is they trade in penny stocks (share value <$5). They feel that the risks are low since each stock is “only” $1.22. What they don’t know is that penny stocks are much more riskier than other stock (company) in the markets. Penny stocks are not a sure thing. Just because the share price is less than $5 doesn’t mean that it won’t go down more or even become bankrupt. When you play at this level, you must be aware of changes that will occur without warning and be prepared. If you feel that this is the way you want to go then make sure you check out each company in great detail.

Professionals

This last group is not the guys who work in Bear Sterns or Morgan Stanley (remember these are the type of guys who cause the housing and credit crisis from their immoral ways. A real professional doesn’t let his emotions get in the way of his trades. They do their due diligence and detailed research into each company they’re thinking about. They don’t just dump money into a stock because the herd is doing it. They take their time, they know that it’s a matter of patience and discipline. If you are at this level (or think you are), don’t sit back on your laurels. Just keep doing what professionals do…study and practice.

The issue with buying penny stocks is that it is very risky. The statistics for investors who trade penny stocks and lost money is some where near 70%, so the odds are against you. You also need to be aware that there are some brokers who will inflate the stock by dishonest practices. You need to research the broker who offers these stocks just as much as you do in the stock itself. If they claim to having insider information, that is a sign that you need to walk away from that firm. The only way to find a good penny stock to invest in is to consult with a broker, but be careful they make money by make sales and may only have their own interest in mind. There is big money in trading penny stocks for these guys and to do that they need to sell you the stock.

Many investors have made a fortune in buying penny stocks, but for every great windfall stock that made millions, there are about nine that lost billions collectively. Look at Yahoo, they were trading at $0.78 a one time and now trade in the $20 range. Like I said though, that’s only one of thousands of companies that are traded every day.