Stock Market Strategies
There are many different ways to play the stock market. These stock market strategies vary in so many ways. In this post I’ll go over a couple of these strategies to help you decide which one is best for you.
You need to also take into consideration that some strategies require you to be more involved in the day by day market than others. All of them involve doing your due diligence in regards to knowing what you’re investing in. Research is the key to being able to make money in the stock market.
The buy-and-hold method is good for an investor who won’t have much time to follow the market on a regular basis. Once an Investor has found a company that (s)he wants to invests in, they build a position into the company and basically leave it alone. What you need to know is that you never buy all of your share in a company at once. Stock prices rise and fall all the time and if your timing is not right, you could lose a few percentage gains. Buying your stocks incrementally and not all at once will help you for when the price falls. You buy as the price drops to lower your cost basis (average price per share). With this strategy, I recommend that you don’t invest more than 20% of your total portfolio into any one sector. Diversifying your portfolio is the best way to hedge yourself against sudden drops in any one sector.
Day Trading is something that everyone has heard about. Day traders usually trade penny stocks, but are also known to do the same with mid-cap or larger companies. This is one of those strategies that require a lot of time during the trading hours. Unlike the buy and hold method, most day traders will not hold their position in any company for more than three to five trading days. This method is not good for those who are still new to the stock market.
Shorting a stock is a phase that is used when an investor believes that the price of a company’s stock is going to go down in value. What an investor does is that (s)he’ll borrow shares from another stock holder and sells them. The investor may have a particular date that he’ll need to return the borrow shares. During that period, the investor expects the price per share to fall at which time he’ll buy them and return those share to the lender.
There are other strategies, but I wanted to just give you a few for now. the others will be in a later post.
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How To Read The Stock Market
Learning how to read the stock market is not such an easy thing to do. Of course many of you are asking, how am I suppose to make money in the stock market if I don’t know how to read it? The important thing is not to watch the entire market, but to watch the stocks you’re invested in or the ones you are planning on investing in.
I’ve been trading stocks for many years and to some extent, I still don’t know how to read the stock market. The overall market is just something to use as a benchmark in our economy. I’ve had days where I’ve made some big gains in one trading day, but the stock market was either flat or it lost some value.
If you’re one of the season traders, you’re most likely thinking that I was shorting the market, but that’s not the case. I invest in the stocks to go up in value, not decrease. Shorting a stock is one of the many stock market strategies that investor use to increase their profits, but as an average investor or beginner, it is not an easy strategy for you to use. Of course when the stock market has made some large gains in a short period of time, one might want to look at the Proshares Ultra-Shorts. The reason for that is because these stocks actually go up in value when the related industry, sector or indicies takes a dive.
I don’t recommend any beginner to try trading stocks in this manner. Instead learn as much as you can in regards to buying stocks to go up in value. Later on you can learn about shorting stocks. When you learn how to trade stocks and to get a feel for the market, then look into trading stocks on the long side (to go up in value) and short side (to go down in value) to increase you profits.
Learning how to read the stock market is something that takes a lot of time to be able to successful doing, but there is so much more you can learn about in the mean time. Study the companies you’re looking to invest in. Reading their balance sheets, listening to their conference calls and read their quarterly reports. That is what it’s going to take to make profit when buying and selling stocks on wall street.
