Stock Market Guide: What Is the Best Stock Trading Strategy?
Investing in the stock market holds the potential to make you incredibly rich or swallow up all of your money. There are methods that can be used to optimize your ability to make money without incurring too much loss.
We’re going to take a look at some basic principles of working with the stock market in this article, giving you some insight into how you can reliably make a good amount of money over different periods of time.
Hopefully, the information below can help you find the best stock trading strategy for you and get you on your way to a brighter financial future.
Let’s get started:
How to Find the Best Stock Trading Strategy for Yourself
The first thing that you have to identify for yourself is the type of growth that you’re looking to experience. The stock market holds a number of different avenues for people to make money. Generally speaking, those options are riskier the shorter they are.
As you might have noticed with the GameStop explosion, individuals who jumped on the train early might have made tens of thousands of dollars. Those who waited too long to sell might have lost just as much or more.
Some stocks skyrocket from a value of less than a dollar to a value of more than thirty dollars. While it might not too significant on paper, imagine that you owned 1,000 shares of a stock that was valued at one dollar. A sudden stroke of luck could send your shares to a value of over thirty thousand dollars.
That would be a freak incident, but it’s possible. Alternatively, issues with a company can send shares plummeting. Those ups and downs are able to be capitalized on, but they’re also able to be avoided to some extent.
We’re going to talk about two distinct practices of working with the stock market. We’ll discuss day trading and long-term investing. You might choose to take either path or try to strike a balance somewhere in the middle.
Having a decent idea of both, though, should help you choose how you want to move forward.
What is Day Trading?
Day trading is the process of buying and selling stocks over the short term to try and capitalize on growth before it goes back down. For example, you might buy a hot stock at 9:00 AM, only to sell it off two hours later and make ten thousand dollars. Similarly, if you’re not careful about how you trade, you might fall asleep after purchasing that stock and find that you’ve lost ten thousand dollars in one morning.
This is a method of trading that you have to dedicate yourself to. It’s smart to be active online and monitoring the various stocks you own for a set period of time each day. As the market opens at 9:30 AM and closes at 4:00 PM central time, you might just dedicate yourself to those hours.
There may be some stocks that you keep for longer periods of time if you’re a day trader, but it’s important to sell incredibly risky stocks before the market closes. It’s also unwise to put all of your eggs in one basket that seems like it’s about to explode.
Some stocks generate a lot of buzz and the intensity of those talking about the stock might draw you into the idea to purchase shares equivalent to most of your money. This is never a good idea because those stocks only blow up a small percentage of the time.
If there were absolutely surefire ways to predict the market changes without having illegal access to information, many people would use those options and the market would be a different place. You can use tools like limits and stock timing signals to help you fine-tune your process and reduce risk marginally.
Know that there aren’t sure bets, but a smart day trader can become very wealthy in a short amount of time.
How about Long-Term Investing?
Do you ever wonder how otherwise average people can wind up with millions of dollars in their savings accounts? They don’t have lavish jobs or make too much money every year, but they turn sixty-five and retire with more money than anyone would know what to do with.
These people have probably capitalized on the value of compound interest and turned their savings into a retirement fund. If you were 20 years old and contributed $4,000 per year to a savings account that accrued 7 percent interest annually, you’d retire at 65 with more than 1.2 million dollars in your bank account.
As you aged, granted you made it all the way up to 100 years old, you’d wind up with closer to 12 million dollars. All of that money would be generated from less than $200,000 in contributions. Now it’s tough to contribute that much into your savings account, even over a period of 40 years.
That said, the intelligence with which you invest your money in the stock market for the long term can impact those figures a whole lot. You might find the right investments and let them grow for ten years, only to make $200,000 off of the arrangement. Investing for the long term isn’t so much about predicting short-term changes in value as it is finding companies that are likely to do well in the future.
Making the right choices with larger amounts of wealth requires insight into the market, how the economy functions, and what is likely to happen in specific sectors in the future. If you can get enough good insight into those factors, you can invest significant amounts of money in different companies and create a healthy retirement fund for yourself.
The amount of research and effort you put into those decisions is well worth it. If you think about putting 10 hours of research into a stock that could potentially earn you $100,000, that’s a value of $10,000 an hour. Try to find a job that would give you that much money!
Want to Learn More about Investing?
Finding the best stock trading strategy for you and sticking with it is the best way to earn money on the stock market. There’s a lot more to understand in the whole process, though, and we’re here to help.
Explore our site for ideas and insight into finances, investing, and a whole lot more.