Since the stock market is reaching all-time highs (which we’ll talk about later), it’s only fitting we discuss stock trading and some proven stock trading tips for winning in any market.
There are an unbelievable amount of strategies that exist when it comes to stock trading. Most people turn their money over to their 401k or favorite mutual fund (which by all means is wise… especially if your company matches your contribution). See how powerful that can be in this article on maximizing your 401k.
But for the more adventurous investors, it is much more thrilling to buy and sell stocks on their own; also known as a retail investor.
If you are a retail investor, this article is for you.
When taking such a risk, some find themselves at great losses while others appear to nail it every pick.
Is it luck? Strategy? Patience? Skill?
Long story short, it’s a little bit of everything…
Given that there are many ways to make money in the stock market, it’s important to consider what you’re trying to do. Most just attempt to buy low and sell high, while others like to buy stocks that pay a decent dividend.
If you’re new to trading, stick to the basics for now. However, as you begin to dabble more and more, you’ll learn about options trading, margin trading and more.
In fact, I recommend that all new investors, and perhaps struggling investors, learn about being a value investor.
First introduced in Benjamin Graham’s book, (Warren Buffet’s mentor), The Intelligent Investor, the value investor is one who has the ability to evaluate a stock or company’s true or intrinsic value and figure at what price the company is worth buying. Furthermore, a value investor studies to be able to know a good buy price and sell price while considering many factors both internal and external.
A value investor is one who can analyze a company’s financial statements and SEC Filings to consider their value. These are valuable skills to have. Check out Phil Town’s Youtube Channel called Rule #1 Investing, he’s all about value investing. OR better yet, read his book: Rule 1: The Simple Strategy for Successful Investing
To win in the stock market, you must realize it will take some study and home-work… something not many feel like doing. However, if you can see and act upon the benefit of learning such things, you will indeed be setting yourself up for success. Good job.
Now, if you already understand value investing and perhaps want to try trading on a more short term horizon, keep reading.
Short term trading (buying and selling within a couple days, weeks or months) can keep you up at night and distract you from life if you don’t know what you’re doing. I was there…
I thought I was ready, however, I quickly realized I had a lot to learn. After studying and listening to people who have considerable knowledge and experience, I’ve learned some critical pieces of information that have since sent me on an overall winning streak.
If nothing I’m about to say makes sense to you, you’re probably not ready and are merely gambling just as I was…
Everyone likes the story of the guys who bought Amazon or Apple when they were mere penny stocks. Thus, we get thinking about the possibility of us buying the next Amazon and we end up trying to hit a homerun on bad pitches (bad stocks)…
It’s important to know that there were thousands of “big picks” that came and went. To do well in the market, you don’t need to swing for a home-run every time and nail it all on one stock.
“Think about what you do when you climb a mountain… you take it one step at a time.”
So here are some critical lessons and proven stock trading tips that I learned which may help you to succeed short term in the stock market.
Proven Stock Trading Tips:
1) Don’t forsake the principles of value investing – these are the basics every investor should know.
2) Select a few stocks to watch and study them with intensity.
Most investors watch maybe 15 stocks at most and usually only hold less than 8 of them (depending on your portfolio size). Check out this info on this tip here.
3) Have a portion of your portfolio long (at least 20%) and stable – Don’t risk it all
While it’s fun to be making short term moves, it would be wise to maintain some more stable long term stocks or funds in your portfolio.
4) Start small or simulate trades. This will help you develop in your decision making. Check out Investopedia’s stock simulator
Don’t make big trades just yet. Test the waters by practicing some techniques before and see the movement of the stocks you’re watching, just like a surfer before he rides the waves.
5) Understand price levels and current market forces
As you watch stocks and study their movement, you can start to see the price ranges at which they trade in (some call it support and resistance levels). Then, as time goes on, you’ll see what can affect the trading range (earnings, industry demand, external news, lawsuits, etc.). Check out this article for more info on that!
6) Trade stocks with volume and transparency
Sometimes when you trade stocks with little volume or transparency, you’ll find them plateau with little to no movement and little to no information on the company. This is like getting caught in no man’s land. It’s a waste when you tie up funds for nothing. Try trading stocks with a daily average trade volume of around 1M. You don’t need to be an expert on volume but here is more info on why volume matters in trading.
7) Know when to buy and when to sell – Never trade on emotion!!!
Okay, now you’re probably saying “how can anyone know that?” But here is what I mean: don’t just buy a stock to buy it without first looking into the fundamentals and studying its movement. When you’ve got a winner, or a loser, you need to set emotions aside and make rational decisions.
8) Lock in profits on winners
Sometimes when a stock you pick goes up, it’s not always the best thing to hold because it might just come right back down (which could be another chance to re-enter or bolster your position). Therefore, don’t be afraid to lock in some profits whether it be selling all or some of your position. Check this article for more info on locking in profits.
Have you considered trading with Robinhood? There are many brokers out there who charge a butt-ton on commission fees, just for buying and selling stocks. Robinhood is the first broker to offer $0 commission stock trading, all of which can be done right from your phone. Meaning you pay no commission fees for buying and selling stocks – NONE. At the end of year they show you how much you’ve saved by trading with them… it’s worth it.
If you want to trade stocks with Robinhood, sign up through my link where we will both receive a FREE stock in a random company! 🙂
And like everyone always asks “How do they make their money then?” Read how here!
9) Know that you don’t have to ride every wave. If you do, you’ll likely be in many crashes
Many people, when they see a stock going up, try to hop on board and ride it out. However, they’re usually just buying it at the peak right before the correction happens. Why would it come back down? Because many people are practicing tip #8 and locking in some profits when they think it’s over valued. So when you see a stock going up, don’t feel like you need to buy it too.
10) Just remember, small wins over time add up – Don’t get greedy
Retail Investing can be a great source of income and a good place to grow extra money. It is important to be diligent and watchful when it comes to short term trading! Hopefully these tips will help you on your investing journey. Stay tuned for more posts on the current market condition and stock trading in general!
To learn about mistakes not to make, check out Daniel Wesley’s Article at CreditLoan.com entitled 12 Common Investment Mistakes (and How to Avoid Them)
And be sure to check out my article about avoiding mistakes!
Cheers & God Bless!
DISCLAIMER: The opinions, analysis and statements presented in this article and on this site are solely my opinion (based on my own research), not affiliated with any past, present or future employment or business affiliation. This post contains affiliate links of the products that I recommend, which means if you purchase products through the link, I’ll receive a small commission. This helps support the blog and the time and effort put into it. Thank you for the support!!