Stock investing How do you make a profit from stocks?
How do you prevent losses?
We will look at the basic strategies. Or you can join a club that does it all for you.
Buy low and sell high: This is good advice in principle but it isn't always easy to do.
For example, if you had bought into Microsoft before the stock market crash in 2000 you would have done much better than someone who bought in around the current price and just hoped the stock market recovered.
You need to look at the overall trend of the market.
Look at the larger picture: If the overall market is rising then stocks are likely to rise too. If the market is falling then stocks are likely to fall too.
If you can find a stock that is heading towards a profitable position but the whose larger market trend is heading downwards then you can buy that stock at a lower price and ride that stock all the way to a profit.
For the short term you are looking for stocks whose market trends are heading up – specifically towards the “up” line – so you can buy them at a lower price than someone buying a stock that is heading downwards.
But when you are buying long term stocks in stock investing the trend is more important: As a long term investor, you need to look at the general market trends in order to make your decisions.
That is because individual stock trends can be heading in different directions, and you need to decide if they are going to head up, down or sideways.
For example, there is a small possibility that the market is headed down which may make this stock investing a good buy at the current price.
The basic strategy is to buy stocks that are headed higher:
Buy stocks that are headed higher – especially if the broader market is heading up – in order to ride a rising stock all the way into a profit.
And while we are on this topic – don't just buy stocks that are heading up too.
Stock All The Way To A Profit
What you should be doing when stock investing is looking at stocks that have just broken a major resistance line – because these are stocks that are headed towards a profitable position. These are the stocks whose market trends are just about to reverse so you can buy them at a low price and ride that stock all the way to a profit.
Remember with stock investing – buy high and sell low: The only reason you buy stocks at a higher price than a stock whose trend is heading lower is that you have a good chance of making a profit. Buying at a higher price doesn't mean you necessarily have a 100% chance of making a profit.
But it does mean that your chances of making a profit are much greater than if you buy a stock whose trend is heading downwards.
A 50% chance of making a profit in stock investing means that if you buy a stock whose market trend is heading downwards you will probably lose $500.00 at most. But you will have a zero per cent chance of making a profit.
Market Trend Is Heading Upwards
You may have a 50% chance of making a profit, but it is still better to buy a stock whose market trend is heading upwards because you will have a higher chance of making a profit stock investing and a higher chance of riding that stock all the way to a profit.
When you are looking at stock investing you should be looking at trends. Trends tell you if a stock is heading higher or lower and whether it has just broken a major resistance line or not.
Once you have determined whether a stock is heading up or down you can then determine whether or not to buy that stock and what price to buy it at. By looking at trends you can quickly determine whether a stock is going up or down and whether it has just broken a major resistance line or not.
Watch The Price Of A Stock
Sometimes you can even determine the end of a trend by looking at the trend lines – and that is important because all you have to do is watch the price of a stock to tell whether it has just broken a major resistance line or not.
If you know the price of a stock when it breaks a major resistance line then you know exactly where it will stop and the best time to sell it.
Some stock investing trends are more tricky than others and that is why they are more exciting. If you can determine the start and the end of a trend then you have all you need to be able to make an educated decision whether or not to buy that stock at a price that you think is still good.
Someone Else To Do It For You
If you cannot determine the start and the end of a trend then you are stuck guessing or relying on someone else to do it for you. This is when you need to get into a stock that has already made a big move up and look for the breakout.
Spotting A Breakout
There are two ways that you can go about spotting a breakout – you can wait for the stock to make a new high before heading into it or you can look at the volume of stock before deciding whether to buy that stock.
If a stock is getting high volumes but the price is not making a big move then that tells you that the stock is still on the upswing and you should wait for it to make a new high.
If a stock is getting low volumes but the price is making a big move then the stock is probably not ready to break out just yet.
If a stock is getting high volume but the price is still making a big move then the stock is probably still a ways away from making a move.
Broken A Major Resistance Line
Once you have decided on a stock to buy to start stock investing then you need to check the volume of that stock before you place the order to buy.
If the stock has just broken a major resistance line then you should be considering holding the stock until it breaks another resistance line or selling at breakout price.
If the stock is not making a big move then you should be considering shorting the stock or going for the stop loss.
Techniques Can Be Used By A Stock Investing
All these techniques can be used by a stock investing investor or trader as an entry signal. But do remember that each one of them must be applied by a knowledgeable investor and they must be followed by a knowledgeable trader.
I hope you found this post helpful in your research and can take something from it that helps you on your stock investing journey.
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