Choosing stocks is a complicated process. Every investor goes about it a different way. But if you want to be able to select profitable stocks having some general steps to follow is important and helps you minimize risk. So let me outline three possible steps you could take.
Step 1. When you start investing in the share market you need to know your time frame and investing strategy. This strategy is what dictates the stocks you will buy and when you will buy them.
As an example, investors with long range strategies have built their plan so that they would be hunting shares in companies with competitive strengths that will endure with time and a history of growth. They would use decades of historical data to analyze these companies and would carefully study the company's corporate structures, strengths and weaknesses.
Shorter range investors might consider some of these alternatives:
a. Trading on Momentum: looking for stocks that have increased in price and volume recently. This is a common and supported strategy for investing. It is underpinned by locating stocks with smooth rises in price with the goal of riding the trend upwards as the price continues to increase.
b. Contrarian Strategy: this is a strategy that looks a short term sudden drops in prices caused by sudden announcements from a company of bad news. Because the stock market is not efficient prices don't always represent true value. When panic selling has occurred a stock's price will often drop below market value. Using candlestick analysis Contrarian traders can identify this situation and may buy on expectation of a reversal of price.
Step 2. You should use a form of software that has filters to narrow down your research. Many types of online programs and downloadable software can screen in or screen out different types of stocks according to your criteria. This makes the process of concentrating on your timeline and price much more efficient.
Step 3. The final step is portfolio diversification. Diversification is an essential element of any good trading strategy because it is the way traders minimize risk. Once you have a number of stocks that meet your trading criteria conduct a Markowitz analysis to determine how much money to allocate to purchasing each stock.
The three steps I've outlined are just preliminary considerations for traders new to the stock market. You should make it a priority to continually improve your education about financial markets so that you can expand upon these basic steps. Doing so will make sure your confidence and success continue to grow.
Step 1. When you start investing in the share market you need to know your time frame and investing strategy. This strategy is what dictates the stocks you will buy and when you will buy them.
As an example, investors with long range strategies have built their plan so that they would be hunting shares in companies with competitive strengths that will endure with time and a history of growth. They would use decades of historical data to analyze these companies and would carefully study the company's corporate structures, strengths and weaknesses.
Shorter range investors might consider some of these alternatives:
a. Trading on Momentum: looking for stocks that have increased in price and volume recently. This is a common and supported strategy for investing. It is underpinned by locating stocks with smooth rises in price with the goal of riding the trend upwards as the price continues to increase.
b. Contrarian Strategy: this is a strategy that looks a short term sudden drops in prices caused by sudden announcements from a company of bad news. Because the stock market is not efficient prices don't always represent true value. When panic selling has occurred a stock's price will often drop below market value. Using candlestick analysis Contrarian traders can identify this situation and may buy on expectation of a reversal of price.
Step 2. You should use a form of software that has filters to narrow down your research. Many types of online programs and downloadable software can screen in or screen out different types of stocks according to your criteria. This makes the process of concentrating on your timeline and price much more efficient.
Step 3. The final step is portfolio diversification. Diversification is an essential element of any good trading strategy because it is the way traders minimize risk. Once you have a number of stocks that meet your trading criteria conduct a Markowitz analysis to determine how much money to allocate to purchasing each stock.
The three steps I've outlined are just preliminary considerations for traders new to the stock market. You should make it a priority to continually improve your education about financial markets so that you can expand upon these basic steps. Doing so will make sure your confidence and success continue to grow.
About the Author:
James Spacey has written all kinds of stuff about how to make money online. For more examples of James' work please visit bestcontentsinsurance.info today.. This article, 3 Tips For Selecting Profitable Stocks is available for free reprint.
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