Trade Stocks
This section will provide us with some simple yet effective techniques to invest in stocks without being concerned about lot of analysis.
Challenges for a novice/average investor:
- We don't know how to select Stocks
- We don't understand Fundamental (annual report, earnings, sales, P/E ratio, etc) or Technical (MACD, RSI, ROA, CCI, BOP, etc.) analysis
- We don't know when to BUY/SELL Stocks
Hassles and frustrations we all go through:
- We buy stocks cause someone told us or it was just a hunch or some expected news, etc. without any specific logic or understanding
- We bought a stock which went up rather doubled but not knowing when to sell, now the stock is back to same price we bought
- We bought a stock cause a friend gave us a tip, also a good news was expected and now the stock is down
- We bought a stock cause everyone said it was at the lowest level and now its going down further
- We were trying to follow "averaging down" idea and now we have more losses
- We buy a stock rather we simply marry a stock and won't let it go forever even if we have good profits or huge losses
- We see our portfolio is in deep losses (red) and "HOPE" someday a miracle will happen and we will recover with huge profits
Things to remember -
- Investment in stocks is risky, law of economics - high gains come with high risks
- Investing in a particular stock at the right time in the right market is critical, timing is important
- Never marry a stock, its NOT your family member or antique piece, its just an investment
- Losses are part of investment trading and we cannot avoid losses, the key is to keep them minimum
- NEVER follow averaging down strategy, if you are already incurring losses then there is no reason to buy more in anticipation
I am Confused!!!
No worries, always ask questions and try to understand the basics. Remember, you don't need to be financial analyst but just need to know where to put your money to work for you.
Below discussion is pertaining to why should we trade stocks:
On our mind and how it fits our Strategy...
Its very risky, does it mean, I should not trade Stocks?
No. One should have a decent understanding of which stocks to buy, when to buy, market conditions, etc so as to avoid buying bad company stocks in good market or buying good company stocks in bad market.
Why not put my money to work by investing in mutual funds or ETFs?
Of-course, we can invest in mutual funds or ETFs. But these financial instruments are slow moving entities while stocks can make significant gains in comparable time frames. However, as law of economics tells us, more risk = more gains. By nature Stocks are more volatile and risky.
What about transaction Fees?
Typically, most brokerage firms apply fixed transaction fees for trading Stocks.
What about risk?
Law of Economics: Higher Risk = Higher Gains
Stocks tend to be very volatile in nature, hence our stock selection is crucial. Buying right stock at the right time in the right market can make all the difference between being successful investor vs deep in losses.
Can we use our Strategy for Stocks?
YES. More information is provided in next section.
No. One should have a decent understanding of which stocks to buy, when to buy, market conditions, etc so as to avoid buying bad company stocks in good market or buying good company stocks in bad market.
Why not put my money to work by investing in mutual funds or ETFs?
Of-course, we can invest in mutual funds or ETFs. But these financial instruments are slow moving entities while stocks can make significant gains in comparable time frames. However, as law of economics tells us, more risk = more gains. By nature Stocks are more volatile and risky.
What about transaction Fees?
Typically, most brokerage firms apply fixed transaction fees for trading Stocks.
What about risk?
Law of Economics: Higher Risk = Higher Gains
Stocks tend to be very volatile in nature, hence our stock selection is crucial. Buying right stock at the right time in the right market can make all the difference between being successful investor vs deep in losses.
Can we use our Strategy for Stocks?
YES. More information is provided in next section.
So let's understand how to select stocks and how to apply proper technique...