Profiting Stocks options are a very complex process and investors have a variety of options. However, it is wise to follow the general steps to reduce investment risk. This article will outline these basic steps for selecting effective stocks.
Determine the timing and standard investment plan. This step is very important because it will determine the type of stock you are buying.
Suppose you decide to become a long-term investor for instance, you will want to acquire stocks with a continued competitive advantage and sustainable growth. The key to acquiring these kind of stocks is by looking at the performance history of each stock in the last few decades and doing a simple S.W.T.T. (Strength-weakness-opportunity-threat) analysis in the company.
If you decide to become a temporary investor, you may want to stick to one of the following strategies:
a. Momentum Trading. This strategy is to look at stocks rising in both prices and volume in the past. Much technical analysis supports this trading strategy. My advice to this strategy is to look at stocks that have shown a steady and smooth increase in their prices. The idea is that when stocks fluctuate, you can simply ride into the trend until the trend is down.
b. Contrarian strategy. This strategy is to look at the extreme reactions in the stock market. Researchers have shown that the stock market is not always efficient, which means that prices do not always accurately represent stock prices. When a company announces bad news, people are shocked and the price often falls below the fair value of the stock. To determine if stocks have responded to the news, you should consider whether it is possible to recover from the effects of bad news. For example, if stocks fall by 20% after a company loses a legal liability that does not permanently damage the product and the business product, you can be sure that the market will respond favorably. My advice to this strategy is to get a list of stocks that have had a recent fall in price, analyzing the potential for conversion (by candlestick analysis). If stocks show candlestick exchange patterns, then go through the latest news to analyze the causes of the recent fall in prices to find out if there are any over-selling opportunities.
Do research that offers stock options that are relevant to your investment time and strategy. There are many stock filters on the web today that can help you find stock according to your needs.
Once you have a list of stocks to buy, you will need to classify them in a way that provides a high level of reward/risk. One way to do this is to do a Markowitz analysis for your portfolio. The analysis will give you the amount of money you should share in each stock. This step is important because diversity is one of the free meals in the investment world.
These three steps of Profiting Stocks should start with your goal of making money consistently in the stock market. They will improve your knowledge of financial markets and can give you a sense of confidence that helps you make better trading decisions.