Stock trading Strategies – Listen to the experts and devise your own strategy
Let us begin with the basics and define what a strategy is? A strategy is a blueprint to achieve your ultimate goal. That said it is the blueprint which is a must if you want to money in the stock market.
That in turn means that you need to define your goals when you are investing in the stock market. That goal in most cases can be defined in percentage terms or in pure money terms. It is better to define the length of time in which you want to achieve the goal.
Second point is the timeframe – Timeframe is everything in the stock market. Some people only want to day trade and some want to go in longer term. If you want money in the long term then the stock trading strategies will be different than what you will get when you only want to day trade.
If your timeframe is only for a day that will mean that you are interested is day trading. Now day trading is a concept in which you basically start with cash at the start of the trading day and end with cash. The basic premise is that you buy in large quantities and make huge money with small price movements.
Day Trading Strategies for beginners
A day trader is looking at entry point and an exit point for the stock during the day. The tools used to arrive at the entry point can be several but the must among them are the
Technical analysis – Candlestick Charts
Level II Quotes
Reliable news source
Some of the strategies in the day trading arena are
Scalping strategy
Fading Strategy
Momentum stock picking
Note: In this also you will need to be very adept at picking the correct stocks. You will have start with small volumes and see if your picks are making money. Once you know how to spot the trend then you will start making money.
The next trading strategy which is in demand nowadays is the Trend trading or as is called Momentum stock trading. In this the aim is to pick the stocks which are moving in a particular trend and then exit the stocks which are no longer moving. This stock trading stragey is based on particular sectors research and put forward by analysts. This is a good way to make money only if you know when to exit the stock. You can hold the stock for up to six months in this month .
Trading based on the news – Day traders use this lot and that means that you buy the stock base on the news regarding that company. In this after hours trading or the pre-market trading plays a major role.
Dividend stocks – A lot of people want to have some income alongside their regular income so they only buy stocks which have good dividend payouts
Picking up penny stocks – A lot of people trade only penny stocks. These are stocks which are less than $5.00. These stocks are very risky to trade so beware.
Elliot Wave principle trading – In this the trends and reversals are used as away to enter and exit the stocks.
ETF trading – This is done by the traders who do not want to invest in stocks but they want to invest in the sectors. The ETF funds generally are geared towards sectors or countries or particular commodities.
Enough of those short term investing strategies let us talk about long term investing strategies
This trading strategy is known as buy and hold strategy. In this you do the fundamental analysis of the stock and then just keep on evaluating the company and will exit the company only if you see that company now is not worth investing.
Effectively you are placing the confidence in the management of the company that it will do well and in turn will have the share price in a general upward trend. That said you need to monitor the entire variable for the fundamental analysis that is the company, the industry sector as well as the overall economy.
In the regular word of stock picking for long term there are two strategies and these are known as
Top Down Strategy – You invest in a sector and drill down to pick good stocks in the sector
Bottom Up Sector – In this you only invest in stocks with sound management and they are generally leaders in their sector.
Blue Chip Strategy – This is known as the strategy which I personally brand it as the 30 stocks strategies wherein you only focus on those are the components of the Dow. This works well in most cases unless you get into a situation where your investments go bad like with many people who had Citibank in their portfolio. Well you can also invest in a lot of blue chips apart from the Dow
Then last but not the least is the one which is my personal favorite and I take a stab at it every now and then to make good money and that is the special situations strategy. I keep my eyes open for any stocks in controversy or for that in any sort of negative sentiment and then go for the stock. The major thing to note is that here you will have to pick the stocks that have negative sentiments however they are still having good fundamentals. In short you are playing solely based on the sentiments prevailing in the market.
Related posts:
- Forex Trading Strategy – Different forex trading strategies used by forex traders
- Stock market investment strategies – Top down investing strategy
- Stock investment strategies – Buy and hold strategy
- Stock investments strategies – Bottom up investing strategy
- Forex Swing Trading – How to do Swing Trading in Forex
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