Trading Tips

Trader’s Corner – Where we talk about how to learn the stock marketStock trading systems and of course, the stock market basics.

Well, irrespective of how well, or badly your portfolio did last year, no doubt most of us will now have our eyes firmly fixed on the prospects of some sort of economic recovery for our respective native countries, and with the onward march of Globalisation, none of us can afford to be too introspective.

Given the meteoric recovery of most of the world´s stock exchange indices over the past 24 months, in my opinion, in the foreseeable future we will see a fairly substantial retracement.

Yet, while investors should not panic over this, it is vitally important to ensure that your personal portfolio, and/or short term trading strategies are robust enough to weather any forthcoming storm.

That said, and taking into account that there are over 1000 new online trading accounts opened every week, (that´s a lot of novice traders dipping their feet in the water for the first time), I thought that I would start of my New Year´s column with a re-visit of some often stated (but not so often observed) investment tips.

So, before all you old hands out there click the close button, just take a moment to consider whether every trade you made last year was as good as it could have been! If not, maybe a re-cap of the basics is not such a bad way to start off the new trading year.

So in no particular order, here are my Top 50 Stock Investment Tips: (Tips 1 – 10)

1.    As a new investor, you need to learn how to lose, (probably not the most optimistic way to start the list but this is vital), you need to be prepared to take some small losses, and I mean small.

2.    Always cut your losses at a pre-determined point below your purchase price. (read our stop loss orders guide).

3.    Before getting started, it is important that you pick the right online trading platform.

4.    Persistence, enthusiasm and optimism are the keys to successful trading, don’t get discouraged when the odd trade goes against you, (the right mental attitude is vital for successful trading).

5.    To begin with, learn to trade stocks and leave the more exotic and volatile investment methods (FOREX etc) for the future (sic)!

6.    Only invest money that you could afford to lose, (not that we are planning to lose, but if you have the right state of mind from the outset, you won´t be so easily shaken out of your investments).

7.    You don´t need invest a fortune to get started. But only invest 10% max in any one stock (to start with) and try to keep a Strategic Reserve to take advantage of unexpected bargains.

8.    NEVER try to catch a falling knife ie don´t buy shares which are on the slide, just because they look cheap.

9.    Don´t snatch at profits.

10.  Concentrate on a few, high-quality stocks. There’s no need to own twenty or more stocks.

A few days ago I began an article on the top 50 stock investment tips. Today I want to continue with this and list the next ten tips that will help any investor not only conquer the stock market basics and learn the stock market, but will also help seasoned investors succeed with their stock market trading.

Tips #11 – 20

11. Don’t get emotionally involved with your stocks. Follow our system of buying and selling rules, and don’t let your emotions change your mind.

12. Don’t buy stocks in companies with Market Cap under $80 million or £50 million.

13. You get what you pay for in the market. Low-priced stocks are usually cheap for a good reason.

14. You should be using a combination of fundamental and technical investment analysis to picking winning stocks.

15. Fundamental analysis looks at a company’s earnings, earnings growth, sales, profit margins, and return on equity among other things. We pay great attention to the debt/profit ratios.

16. Technical analysis involves learning to read a stock’s price and volume chart and timing your decisions properly.

17. Strong sales and earnings are amongst the most important characteristics of winning stocks.

18. To make big money, you have got to buy the very best companies at the right time.

19. For the above reason, you must learn how to read Japanese candlestick chart patterns, (something that has been around as long as this has got to be of value).

20. Always do a post-analysis of your stock market trades so that you can learn from your successes and mistakes, (don´t lie, you will only be cheating yourself).

The stock market can make you lots of money… it can also make you lose lots of money too.  It all depends on you.  If you approach it rationally and with an effective system, you can certainly make money in the stock market.

Here are the next ten tips I can offer you for investing in the stock market in this new year.  This is what I go by and out of my experience I can tell you that if you follow these tips, your chances of success improve dramatically.

Tips 21 – 30:

21.    Buying a stock as it is coming out of a price consolidation area or base is crucial to making large gains.

22.    Always pick stocks from the leading industry groups or sectors. The majority of past market leaders were in the top industry groups and sectors.

23.    Many big winning stocks come from sectors such as drugs and medical, computers, communications technology, software, specialty retail, and leisure and entertainment.

24.    Volume is the actual number of shares traded by a stock (Find out how to read volume on stock charts).

25.    Stocks never go up by accident. There must be large buying, typically from big investors such as mutual funds and pension funds.

26.    In studying the greatest stock market winners over the past 45 years, bases formed just before the stock broke out into new high ground in price and then went on to make their biggest gains.

27.    The most common pattern is a “cup with handle” names so because it resembles a coffee cup when viewed from the side.

28.    The optimal buying point of any stock is the “pivot point”.

29.    On the day a stock breaks out, volume should increase by 50% or more above its average.

30.    A decrease in price on decreased volume indicates no significant selling.

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