Thursday, October 18, 2012
Best Stocks Market Trading Strategies
Stock market trading can provide you a great opportunity to earn profits. However, due to the uncertainty in the stock markets, it is always advisable to know stock market trading strategies before investing in this arena. Although stock market trading strategies do not always guarantee success, they can help you to maximize your chances of making profits while minimizing losses.
Everybody always says that diversification is a must, all so called experts tend to highly recommend it yet have you stopped to think about it. If you buy dozens of different stocks your investment portfolio is basically representative of an index. That's fine but wouldn't it just be easier to buy an ETF that tracks the price of the index? Of course it would but your broker would never agree to this because they would lose out on valuable commissions. Instead they will probably recommend that you buy multiple managed funds that all pay them handsome commissions.
Value Investing: This is a long term strategy where investors buy a stock they believe is undervalued often because of short term trends or other factors unrelated to the actual worth of the company. Familiarity with financial documents and general accounting can prove to be invaluable, as it enables the investor to understand financial disclosure forms and balance sheets of companies.
Swing Trading: This is a relatively short term strategy, where investors try to identify and capitalize on weekly or daily pricing trends. For instance, if traders act in a bullish manner towards financial companies' stocks, a swing trader might buy these stocks while it is rising and pitch them just before the price goes down. Conversely, if investors are acting in a bearish manner and the swing trader feels that prices are too low, he may buy the stock and hold it while till prices rise.
Seasonal Tendencies: In this strategy, investors try to identify the movement of stocks in certain sectors because of seasonal variations, which are not related to the actual worth of the stock. A hypothetical seasonal variation is when defense stocks rise during the Olympics, when there is a surge of nationalism among investors.
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