The internet is jam packed with so-called independent experts who claim that they made a fortune trading stocks. They are only too willing to share those tips with you for a price. Maybe you recognize the name of the expert, maybe you do not. Which expert is right? Here are 10 tips common to the best stock market trading strategies.
1. Set financial limits. Dumping all your cash into a stock expecting for fast return is not investing. You might as well put that money on a horse in the fifth race and admit to gambling. Stock market investors decide how much money to put at risk before buying.
2. Buy low – sell high. That's the tried and true formula for making money in the stock market. The problem is determining those points. No magic here, just plenty of analysis and research to achieve that simple yet elusive goal.
3. Price rules, value drools. The best research may show that a stock is undervalued or overvalued but the proof is in the price. For totally absurd reasons a stock price may rise or fall regardless of what you and the experts believe is the value. As with anything, the actual price is what people are willing to pay.
4. What goes up, comes down. Even a Cinderella stock on a wild ride to the top is headed back to the bottom when the clock strikes midnight. Online stock traders must get off with some profits before riding their pride to a crushing loss.
5. Change happens. Stocks are subject to directional swings that make no sense. The trends may show it or the change may be due to external events. Either way, smart online stock traders live with it and move on. Asking "why" is not as important as deciding "what now".
6. Yield for Curves Ahead. Once a market move is evident, watch for the direction and duration of the trend. Generally a trend move during a bull market is more likely to be positive. A trend move during a stalled or bear market is more likely to be negative.
7. Says who? The internet is jam packed with stock market trading advice from software vendors, online trading firms, stock market newsletters, analysts and people who want to make money from you. How reliable is their advice? Keep a healthy skepticism about advice you use in making trading decisions.
8. Expertise is no substitute for Instinct. If technical tools alone made for success than the market would be packed with millionaires. Instinct leads the pack when analysis shows up a day late and a few dollars short.
9. The Efficient Market does not exist. The Efficient Market Hypothesis is a myth. The idea that the stock market will benevolently work itself out from peaks and valleys to a level playing field only works in textbook models of capitalism.
10. Be True to Your School. Consistently apply your trading strategy. Flipping strategies only leads to confusion. If the latest hot tip does not fit your trading strategy, it's not for you.