Secrets to Stock Market Strategies
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The 1st Step to a Stock Trading System
Before you get started trading stocks on the stock market you must have a plan. A large part of that plan is knowing which stock trading strategies you believe will give you the best gains. The reason you must have a
strategy is because a person with a strategy plan is more likely to be successful than someone who is basically throwing spaghetti at the wall to see what sticks. This webpage will give you Action Steps for getting started in picking a successful stock market strategy that will work for you.
This series on stock market strategies includes:
How to Invest in Stocks - Picking a Stock Investing Approach
A List of Trading and Investing Strategies
What is a Strategy? - The Theories That Make Up Your Strategy
Before you decide on a strategy, there is one major question you must ask yourself.
The Time Question
One of our most valuable resources is time. Choosing how you want to spend your time is the best way to have a great life. If you're reading this, I'm assuming that you want to spend some of your time investing your money in the stock market. So, the first question to ask yourself is:
- How much time are you willing to spend focusing on trading in the stock market?
The time question is the best way to set yourself up for real success. Here are some examples of time spent trading stocks:
If you have the desire and enough money (brokers have financial requirements for day trading) you can spend all day as a day trader. There are some very talented people who are successful day traders. However, know that it requires long hours in front of the computer and strong emotional discipline. Day trading is comprised of using technical analysis to trade stock in intra-day time periods like one or five minute increments.
Perhaps you're retired and would like to spend 30 minutes each day monitoring your positions and finding new trading candidates. You might enjoy short-to-midterm trade holds. A mid-term trader is someone who is looking for technical price setups, perhaps uses fundamentals or news to pick stocks to monitor and then trades price setups.
Maybe you're working full time and want to spend an hour each week or month to research and place trades. You might like mid-to-long term trades. Traditionally, a longer-term trader would look at company fundamentals and trade trends.
The secret with this step is that the amount of time you're willing to spend trading stocks will influence the strategies that will work best for you and make it easier for you to enjoy the process.
ACTION STEP 1: Thinking about the scenarios above, decide how much time you're willing to spend working with your stock trading system on a daily, weekly or monthly basis.
An Example of How Time Factors into Stock Market Strategies
I like analyzing stocks each day. I look for long and short position candidates setting up using my chosen strategies - The ADX Double DI Strategy and a short side price pattern strategy. Both strategies are strictly technical ones. I don't spend time looking at fundamentals. I then look at the general market direction and if the market is trending I will place my trades. This takes me about 30-40 minutes per day. I spend a hour or so on the weekend reviewing any trades and updating my performance.
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Once you've decided how much time you can comfortably spend on stock market investing you can move on to the question of what approach you want to apply to your stock market investing. The secret here is that to be really successful you must apply stock market strategies that suit YOU - not just pick up a book and follow that strategy. What works for one person may not work for you.
Action Step 2: Think about how you want to invest in stocks - meaning, what's your stock trading philosophy or approach to trading for gains?
Go to How to Invest in Stocks - Picking a Stock Investing Approach
Next, investigate strategies that match up with your approach or what you believe is most likely to earn you a gain on your investment. Do you believe growth stocks will surpass value stocks? Do you think trending stocks are the deal?
Action Step 3: Review the list of stock trading strategies along with the corresponding "Time Commitment" to match up strategies that will work for you. Finally - pick one.
Go to the List of Stock Trading Strategies.
The Real Secret
to Stock Market Success!
The secret to successful stock market strategies lies somewhere in-between being an investor and a trader. The truth is, the very best stock market strategies are the ones that have some technical analysis to them. For investors, simply picking a stock with good fundamentals without understanding what the price is doing is a game of roulette. Having even a basic understanding of technical analysis or what the price is doing will give you far more success, and it's a skill you can easily learn. Otherwise, how do you know when to get in or out?
Successful Stock Market Strategy Equation
Good Stock Candidate + Technical Price Setup = Profits
This goes for traders, too. The traders that use news or TV pundits' recommendations still need some form of technical analysis to profit.
It's also true that if you're a fundamental investor that's not particularly happy with your portfolio performance, you need to use some kind of technical indicator in your stock picking. It's a little like coupling a theory with some applied reality. The applied reality will always make the situation better.
Again, you have a choice of whether a company's fundamentals are important to you or the way a stock's price is performing is enough. It is enough to use a straight technical strategy, but it's not enough to just use fundamentals if you want to be really successful with your investing.
Now that I've told you the truth, don't let the idea of using a stock market strategy along with technical analysis scare you because you're new at stock trading or have never used technical analysis. You're simply deciding that you must know what the price is doing as part of your stock picking strategy. An example of applying a basic, easy-to-use technical indicator to your investing or trading is to look at a simple price indicator. You can begin by using something basic like two simple
stock's price. After that, you can read through brief descriptions of other technical indicators to see if something else peaks your interest. The great thing is that if you see that the price is moving in a positive way, you'll have the confidence that you made a solid decision to buy the stock.
Action Step 4: Pick a technical indicator to use to help you make entry decisions for stock positions.
Go to Technical Analysis Stock Trading
You may want to experiment with a few stock market strategies, and you can even paper trade a strategy until you have a good comfort level. Paper trading is simply creating a watch portfolio filled with the stocks you've picked out. Most online broker websites will provide this or you can use a free service on a site like Yahoo Finance. You basically just pretend to trade the stocks setting up in the strategy you've chosen and see what the stock price does. You haven't invested any money, you're just researching and testing a method.
Remember, any strategy you choose has to sound good to you. You should feel like there are a number of probabilities in your favor and that your positions are poised for profits. Look for a strategy that makes sense to you because you have reasons that a stock's price will rise in value. Then apply the aspect of trading you may not have known about which is that you need a technical factor to confirm the possibility of a price move.
In conclusion, the secrets to success in stock market trading are knowing what will fit into your schedule and knowing that your stock market trading must involve some form of technical analysis.
Congratulations! Know that you have moved through the first step of creating a stock trading system and that it will develop into layers of better probabilities for profits.
What do you want to do next after reading stock market strategies and completing the Action Steps:
ACTION STEP 3: Move on to Step 2 of a Stock Trading System -
Go to How to Find the Best Stocks.
If you have specific questions about stock market strategies, feel free to go to the
Beginner Investing Question page.
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