STOCK TRADING STRATEGIES

There are two basic ways to trade the stock market - taking a gamble or using effective stock trading strategies to determine which stocks to buy, when to sell, and how to protect your investment dollars. It is fairly obvious that strategies outperform gambling by a large margin.

There are very few points that are totally agreed upon. Stock market unpredictability is undoubtedly one of them. Even people with several years of experience are not always able to track the stock market dynamics thereby making faulty decisions.  Watertight stock market investing strategy is somewhat elusive and possibly never achieved.

The stock market has performed measurably better than its competitor investments over the last 25 years.

The way shares work is basically to raise money so companies can invest in their businesses and help them grow.  Shares are traded in the same way as any goods with market-makers, or Retail Service Providers, matching the buyer to the seller.

They buy and sell shares on their own behalf and make a profit on the difference between the buying and selling price when they sell them on to others. The more popular a stock is, the more expensive its shares will be.

The share price is, therefore, like a barometer of investors' confidence in a company's prospects.

Money is made from shares in two ways: Capital growth - where the share increases in value, and dividends - payments taken from profits the company makes to its shareholders.

In order to trade successfully careful research is needed.    Investigate annual reports and accounts. Follow financial pages of newspapers and magazines which is essential reading for investors When you buy can be as important as what you buy, so it pays to keep up-to-date with the news.  You need to be aware of the following:-

• High/Low

• Volume '000s

• Yield

• P/E

• Mkt cap£m

• Profits

• Cash Flow

• Balance sheet

• Gearing

• Earnings per share (eps)

• Dividend per share

• Flotation

When you decide to invest there are three things you need when selecting shares: common sense, research, and luck.

A strategy for investment is very important for damage limitation. There are always unknowns which cannot be foreseen but starting from a solid base will make things less risky.

 Look at a sector which should do well and ensure your research offers proven reasons.  Is the company offering something unique, or are there many competitors in the same field?  It is important to look at the track record and whether the company is growing.   The value of a company is important and whether this is based on past or future performance.

Study the share price over different periods. How volatile is it. What is the view of City analysts, the press and other experts. Is it high-growth, high-risk sort of company, or stable and slow-growing?

Spread your risk. After doing research decide how much you are prepared to gamble, if any,  and how much you want slow but steady investment.

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