While there are common fundamental everyone must learn, individual strategies for trading stocks online vary much the way one’s taste in music or film might vary. After you learn the fundamentals, you need to experiment for yourself and learn what works with your aptitude and sensibility. While reading this article keep the following queries in mind and be honest with yourself:
Humans are subjective beings. Can you stick to this strategy even if you dislike the stock’s company? Do I have the time and resources to stay on top of this particular strategy? What is my risk tolerance? Can I endure the psychological volatility of this strategy? Do I have the liquid capital to really make this strategy work without ruining my finances if things go wrong? Do I have the time and, be honest here, the patience and attention span to stay focused on this strategy long enough to fulfill its potential?
Straight investing can be simple if you choose. The bottom line on this beginner’s strategy is to research and monitor a business’s financials, then way them in the context of general economic factors. From a trader’s perspective, this requires understanding mechanical stock trading strategies. This means you back test to arrive on a set of indicators consistent with a particular stock’s past behavior. You then trade on predetermined trigger points. This isn’t an aggressive trading strategy, and thus evaluations are often only made every quarter when new information becomes available.
As long as you diversify and take your time with your research, this strategy does not involve too much volatility. It is a good approach for people who don’t mind thoroughly researching a company and the market once every three months. The down side is that you must be very careful to do proper research when you buy and sell quarterly or you could waste a lot of time and money.
Stock trading strategies are often identified by time frames. Reduce trade time to decrease risk, or increase trade time to decrease mental stress and trading commissions. If you have the time, resources and personal focus and intensity, fast and frequent trading can be profitable once you know what you’re doing. But many people burn out before they follow their strategy through to fruition, so sometimes the aforementioned simple investing strategy is best, even if not technically optimum from a financial standpoint. You have to be realistic with yourself.
Learning to chart stocks is a key strategy. Essentially, you develop visual cues you associate with mathematical equations. As you learn more and more about how different historical equations manifest themselves in the patterns of the stock market, you start to spot patterns much like the way some people like to spot animals in the shapes of the clouds. This allows you to evaluate large volumes of data more quickly and intuitive make top-level decisions before delving down into the details.
Another fundamental strategy will be swing trading. Swing trading occurs when savvy investors use historical tools such as resistance and support point and Fibonacci numbers to make money on short term price corrections. These corrections are identified within a general incline of a stock’s behavior. Essentially, you’re identifying extreme behavior in a general trend, and that extreme behavior usually corrects itself pretty quickly. So you identify and exploit these quick corrections.