Stock market strategies:
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The first thing you’ll notice if you spend any time at a search engine is the sheer number of systems out there. Many sites are peddling their investment newsletter, in which they sell stock picks based upon their own developed method. Others use computers to generate very complex algorithms. If you thought calculus was hard, take a look at what their computer has to calculate to come up with their choice of the day. The overwhelming number of trading methods and information in general on the net makes it hard for beginning investors.
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The best thing to do when starting out is to read a few books and spend a bit of time researching what’s out there. Once you have your feet wet, you will begin to see yourself leaning toward a broad range of stock market strategies. You will determine the amount of time you will be holding on to your investments. This could range from many years for long-term investors, to many trades per day, through day trading. Visit our trading strategies page delve into the differences between these. For each of the types of trading, you will find many different in-depth strategies people have formed, which can range from buying on a Monday and selling on a Friday to selling losers after 5% and winners after gaining 10%. Some investing software even has strategy filters where you pick one and it shows you all the stocks out there meeting that strategy. Another highly used method is a stock screener, where you input various thresholds a stock must meet and the system filters choices based on what you’ve chosen.
Time to test out your stock market strategies
After some researching, you’ll want to pick a few of your favorite strategies, and test them out. If you are a short-term trader, you can try one strategy over a span of a month or two. During this time you will keep very accurate records of all of your trades. You then move on to the next one. After 6 months or so you will be able to tally up the results and see which of the stock market strategies outperformed the others. Long-term traders can try a different approach. You will want to do your testing by diversifying.
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If you have for example $30,000 to invest, and you have 3 different long-term strategies to test, you would use $10,000 for each. Then, at the end of the test period (one year, for example), you would be able to determine the best one to use for the future. Of course, keep in mind the economy may be a factor, so remember this as you evaluate the results of your testing. Another option is to use software to backtest your trading ideas. This is nice because you can avoid waiting to see if the system worked, since the testing is based on previous stock behaviors.
There are many bankrupt traders who formed a plan with good intentions only to become too emotional to follow it when push came to shove. It is important that your plan is sound. Once you know it is, it would of course be unsound to hold on to a losing stock to avoid a hit to your ego.
Overall, you’ll want to learn as much as you can first, then develop your plan. Whether you trade many times a day or less than once a year, veterans will tell you that simply sticking to your plan as you intended is one of the best stock market strategies. Good luck and may you have many profitable trades!
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