5 Steps to Profitable Investing on the Stock Market
Here is a simple 5 Step process to help get you started out on the right track.
1. Finding a stock.
This is the most obvious and most difficult step in stock trading. With well over 10,000 stocks to trade in a good guideline is to consider first in which sector you wish to trade in first.
Of course you would be looking at a sector that is receiving good media coverage and in which the stocks concerned are going in in value.It stands to reason that you would not be looking too hard at a sector that was experiencing a severe downturn.
Once you have decided in which sector you want to invest in, you can then commence to start researching for a stock.
It is always best to have a system of rules already in place that will be used before buy each stock.
2. Fundamental Analysis.
A lot of short term traders might argue with the need to do any Fundamental Analysis at all, however knowing the stocks past history and the latest up to date news regarding the stock can be very crucial.
A good example would be the earnings season. If you are planning on buying a stock that has missed its earnings target the last 3 quarters, I dare say caution might be very wise.
3. Technical Analysis.
This is the part where the indicators play a part, volume, moving averages,Relative strength index, support levels, resistance levels and all the rest. Whichever batch of indicators you choose, whether they are lagging or leading, may entirely hinge on where you get your information from.
Keep it very simple when you first start out, for using too many indicators in the first place is a guarantee to achieve big losses. Get comfortable using one or two indicators first. Learn their intricacies thoroughly, and you’ll be on the road to making more profitable trades.
4. Follow your choices.
Once you have committed to a couple of trades you should then start to manage them properly. For instance if the stock is meant to be a short term trade you would then obviously be watching it more closely for your exit signals. If it’s a longer term trade you then of course need to set up different time frames such as weekly or monthly checkups on the stock.This effectively frees you up and gives you more time to do other things.
You can use this time wisely for keeping up to date with the news, determining your price targets, set stop losses, and keeping an eye on other stocks that you may want to purchase in the future.
5. Keeping an eye on the bigger picture.
This is best achieved by following the particular sector in which you bought your shares .For instance, if you are expecting a share price to go up on an oil stock you purchased and nearly all of the other stocks in oil sector are also rising, then this is confirmation that you may have made the right decision.
But of course the reverse holds true as well. If the oil sector is starting to show a decline then it might be a good idea to take your profits and run. By knowing in advance and being aware which sectors are heating up or cooling off stacks the odds in your favour.