Monday, 22 March 2010
Buy and hold or Buy and sell: there is a difference in what you look for when you do each type of strategy
So, you’re ready to buy the first stock and want a stock market training course. The first step in stock trading is finding the right stock to purchase; you need to do research for this. Before you begin looking you need to decide whether you’re going to buy and hold or buy and sell. There’s a difference in what you look for when you do each type of strategy.
Buy and hold is a long-term strategy. You look for stock that gives either dividends or one that has continuous growth. Some examples of the type with dividends are bank stocks. Bank stocks usually do well during times of recession. These stocks, like other value stocks offer dividends that offer better returns than many fixed income instruments. They also offer stability in a time that the economy is not performing it’s best. If you purchase value stocks during a healthy growing economic time, you can get a bargain. Because they are so stable, often purchasers overlook these stocks in favor of stocks that are more glamorous and promise new and rapid growth, like technology stock.
If you pick stocks during a recession where the economy is low and under performing, growth stocks are usually bargains. Be sure that you know the company and the management when you select a stock. Some companies aren’t healthy or strong enough to make through bad times. If the stock you select is a retail store, shop there. See what the store interior looks like and check the number of shoppers. There are many clues that tell you a company is in trouble if you just take the time to look. Many experts that pick winners, sample the products before they buy. Remember, retail stocks and stocks with products you use daily offer that opportunity. If you like what they produce, get excellent customer service or choose their brand over another, chances are you’re not alone. This additional information is not solely the basis for astock pick but help in narrowing the playing field.
Short-term investors buy and sell, just need to look for opportunity when they select stocks. Depending on the style of short term investing you choose, your strategy also varies. The short-term investor that expects a company to increase in value over the next few months, selects stock differently than the day trader that looks for changes in the charts of the stock’s price. If you choose to do very short, day trading type of investing, you need to understand the signs that indicate a favorable purchase or closely track a multitude of stocks and find one that has a reoccurring pattern of predictable dips and rises.
It all sounds very complicated and a lot of work. It is. Most people that do short term trading tie themselves to their computer if the market is open, and spend the evening studying for the next day. That is, unless they use a service that does it for them. There are several stock picking services that analyze the charts and help you pick. Some use very scientific methods and others use a system known only by them. One of the more scientific services uses a stock-picking robot. It’s a program that studies the penny stocks, almost unheard of, and makes recommendations based on the tracking of their prices.
Once your homework is complete and you have stocks to buy, decide the price to dump it. If you do short term investing, releasing the stock is part of the program. Find a percentage that you want to earn and when the price hits that is the equivalent to that percent, sell. Also, choose a price that you sell on the bottom end. This is more difficult since you didn’t enter the market to loose money. Most people that do well in investing cut their losses at appropriate times instead of riding the stock to the grave.