Knowing how to buy stocks is not rocket science. There are a few fundamentals that must be in place before you decide if a stock is worth your time. However, there is no proven formula that guarantees that a stock will definitely do well. Life is unpredictable and anything can happen at any time. We’ve all heard of financial crises that have brought stock markets to their knees. So, while the info in this article will greatly improve your chances of doing well in the stock market, they’re not fail-safe.
* Build your knowledge
The difference between the poor investors and the savvy ones boils down to one thing – research. The good investors spend a lot of time researching the company before they buy its stock. They read the annual reports; check on the company’s debt, etc. When they’re thoroughly satisfied that the past performance is a good indicator of future performance, they’ll buy the stock. The poor investor however, just looks at the stock’s price and buys the stock blindly and prays that the price will go up. This is NOT the way to trade in stocks.
* Only trade with money that you can afford to lose
Do not invest your entire life savings in your stocks. If the market comes tumbling down, you will be in financial ruin. Knowing how to buy stocks with the amount of money you have is very important. Ideally, you only want to invest a portion of what you have and not every cent that you have. However much research and planning you do, at the end of the day, the stock market is a still a gamble. There is always a risk of losing your investment. So, only use funds that you can afford to lose.
* Take baby steps
Beginners often over-invest in a variety of stocks without knowing anything much about any one stock. You want to take baby steps and buy one stock at a time, keep an eye on it and see how it all works. During this watching and learning phase, you will gain more experience and knowledge to make better decisions. Then you can slowly invest in new stocks once you do your research. By approaching stock trading in a slow and controlled manner, you will not suffer major losses from poor judgment.
* Decide on a time frame
You should know when you will buy a stock, roughly how long you’ll hold on to it and when you plan to sell it. You might have a plan to sell the stock if it drops below 8 percent of its purchase price. If that’s the case, then ditch the stock if its price drops to the predetermined level. Don’t get emotional and hang on to the stock hoping it rises in value.
You must have a plan and follow the plan. There are cycles to trading. Knowing when to get out is crucial to preventing your losses. Sell the stocks when they hit a peak and just before you think the price will drop. When the price drops and everyone else is scrambling to sell the stock, that’s when you buy the stock again at its lowest price. This is a strategy that has been used by the top stock traders for years. History always repeats itself in the stock market. Be alert and always be in learning mode. The more you learn the better and always proceed with caution. Use your head for most decisions. The heart can play tricks. If you’re logical, you will be a very successful stock trader.
One of the best ways to speed up your investing success is to simply copy success. Someone who actually invests himself, who has a proven track record, and who is prepared to show you EXACTLY what stocks he invests in every day is Grant Gigliotti.
>> Check out his results with BTMA Wealth Builders Club