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Effective and Profitable Stock Trading
Tips
There is a risk in investing in the stock market and in order to
help protect your capital, you must decide how much you are prepared to
lose before you invest. While I applaud you for engaging in profitable
stock trading, you must remember that every time you invest in the stock
market there is an element of risk to take.
Top Tips for Effective and Profitable Stock Trading - By Mark Crisp
1. Keep an eye out for an “educated buy.”
If there is a particular stock that is at a low price but is being
traded in an unusually high volume, there is probably something that those
trading this stock know that you don’t. Find out ways to establish what
information they have that you don’t.
2. Have protections in place if the value of a stock lowers.
Whilst I applaud you for engaging in profitable stock trading, you
must remember that every time you invest in the stock market there is an
element of risk. What will you do if the stock you have invested in plummets
in price? To help protect yourself, you must decide how much you are prepared
to lose before you invest. This is an essential part of any trading plan.
A commonly used tactic is the stop-loss. This is a floor price that you
will sell a particular stock at before you lose any money. A common amount
for many investors is a price 5-10% lower than they paid for the stock.
3. For profitable Stock trading, you should look at a combination
of growing your capital, and finding the best returns. The total amount
of money you have to trade, your capital, should be spread between low
yield and low risk “blue-chip” stocks, and other stocks with the ability
to give higher returns but are possibly higher risk.
4. Write down your trading plan.
You may have a detailed trading plan in your head, but you should write
it down. This helps you identify the goals of your profitable stock trading
plan, and makes you more likely to stick to your plan if things change.
5. Every trader has access to the same information
There are many successful traders out there who have access to exactly
the same information as you do. With the proliferation of online information,
everyone can have access to charts, up to the minute stock prices, and
company announcements. These same trader’s also have losses, but their
effective use of the information available to them gives them the edge
in profitable stock trading over those who are not effectively using the
same information.
6. Buy on the rumor and sell on the news.
Sometime’s you need to buy as soon as you hear that rumor. For example,
if you hear about a potential takeover bid of a company, you want to get
in whilst the stock price is low because it will rise. The same is not
true for selling though. Stock trading is not for the faint-hearted and
should be treated as a long-term investment. You should not jump ship at
every little jump in the road.
7. Work out your entry price and exit price first before buying your
stock.
You shouldn’t just buy a stock at any price. For profitable stock trading,
you should work out what a stock is worth to you and only buy if it is
below that price or it gets down to that price. You should also have sell
prices, for both if the stock increases in value, and if it decreases in
value. Stock prices can be cyclical, so it may be in your interest to sell
stocks at the height of a boom, buy again if the price goes lower, sell
when it goes higher again; and so on and so forth.
8. Diversify your portfolio.
As previously mentioned, there is a risk in investing in the stock
market. Don’t put all your eggs in the one basket. Spread your capital
across a variety of stocks. You may find that as one stock depreciates
in value, another is appreciating in value. This minimizes your losses
and leads to more profitable stock trading.
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