Beginner Stock Trading Strategies And Tips

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What is your strategy of stock trading? How do you pick stocks in which to invest? Do you take tips from the brokers on TV or do you listen to your friends? When you find an option you like, how do you decide when to buy it? More importantly, how do you determine when to sell? Do you feel enough if it makes a fast 10 percent gain? Do you buy more if it drops 50 percent? How many securities do you hold at a time? What percentage of your portfolio do you keep in cash? When does that change?

These decisions are what makes up your investing strategy.

A trading strategy is simply a plan for attaining a goal. A basketball coach would not think of starting the next game without a strategy. A general makes a strategy for winning a war. And who in this world would start a business without having several strategies at hand? At a minimum, you would need a strategy for developing your products, and a strategy for marketing them.

Stock trading is one of the most important action of many people's lives, investing definitely needs a plan. First, we must have a plan for selecting our investments. Second, we must have an a strategy for managing our portfolio, a strategy that tells us how much of our portfolio should be in cash and how much in securities, how many stocks or funds it should hold, and how much diversification it should have with regard to industries and sectors.

Why do we need all these strategies? It is because investing is not intuitive. In fact, it is counterintuitive. For example, our intuition tells us to stay out of a bear market. But if everyone is bearish, that's the time to buy. Why? Because when the market is at an extreme low, everyone who is going to bail has already done so. Therefore, the market is most likely to rebound. But that's counterintuitive. And so is a raging bull market that's at an extreme high.

When the kid who washes your car talks about day trading on the side, as we personally witnessed at the height of the dot-com craze, it's time to sell. When everyone around you seems to be getting rich in the market, it is a natural impulse to want to get in on the action. But with everyone already in the market, there is no one left to drive it higher. The smart money got out a long time ago.

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Source by Clive Chung