Stock Trading Tips: Strategies to Avoid
Stock trading provides immense potential for making money, and millions of people worldwide do make money from it. However, there are casualties, but there is a way to make sure you’re not one of them – just by gathering the right information.
The problem with most stock market books is that you need a large degree of understanding before you can get started. Reading a company’s annual report well can take you years to learn to do properly.
There are hundreds of books on technical indicators and complex trading methods on the market. There are dozens of conflicting ways to trade and make money on the stock markets.
What’s really needed is an initiation into the stock market that can immediately be actioned, and one that sends people up the learning curve quickly, without costing the earth.
What happens to people who want to trade the stock markets, but don’t have an idea about any of these things? Most go into day trading and try to make a little bit of money here and there, thinking that if they only have very short term position, usually intra-day, then they can’t lose too much money. The fact is that over 90% of day traders lose all their money in the first year.
Sometimes, people go the other way and buy familiar stocks, like auto makers, banks and large household names. Here the results are often little better, especially right now. Buying and holding for security in the stock market without a huge level of knowledge is almost as risky as day trading. Buying Ford or GM would have returned 0% return in over 25 years (-65% or more in real terms) . . . and they don’t come much bigger or well known than that!
There is a third way that doesn’t require a huge amount of knowledge of a company’s accounts and a massive amount of knowledge about technical indicators. It’s called momentum trading. Basically, it means taking a position for a few months to a few years. This takes out the two risky sides of the time line and allows you to benefit from the lion’s share of the huge price moves that great stocks always make.
There is still an element of risk involved, but this risk can be largely removed from your trading. What are required are sound principles of money management, combined with methodical research, stock picking and stock selling.
The truth is that anyone can trade profitably. The best way to accumulate capital to provide the income needed to be rich quickly is to speculate in property or stocks in an intelligent and risk controlled way.
Far more people get rich using these routes than with any other method. The key is to get the right information from the right source.
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