Although there is not a single idea that can help anyone in the investment and trading in the Stock market as you need to lower your odd by putting whole different types of ideas and strategies.
Lower the odd increase the chance of success in trading and investment in the share market.
Apart from looking at the market and researching different stocks, you need to keep yourself motivated and have patient to taste the fruit of success.
Therefore, we are going to talk about trading and investment ideas, which can directly help you achieve the target.
Directly Impacting your Trading and Investment
Knowledge about the industry
Before any investment and trading in the share market, just keep in mind that you know the industry or sector. It gives you an edge while you are going to research the stocks. It helps you to understand the working of the firm and evaluate it.
Just understand it with an example, everyone knows how to lose weight, that is you eat less fatty food and exercise. But, why most people are overweight (assuming they don’t have a medical problem)? It is because they lack discipline. While trading and investment in the stock market, the same thing happens. If you are not disciplined, then you lose money.
Diversification of stocks
According to the “Intelligent Investor” book recommended by famous investors of all time, state that there should be adequate though not excessive diversification of stocks. Your portfolio should contain at least 10 different stocks and a maximum of 30 different stocks while trading and investment in the share market.
Plan For Everything
Plan A to Z for your trading
- What price you buy the stocks,
- What is your target price to sell,
- What you will do if the thing went wrong and you started to lose.
- No room for exception.
Develop a Trading Philosophy
Integration of market concepts and trading methods—that is based on your market experience and is consistent with your personality. Developing a trading philosophy is a dynamic process—as you gather more experience and knowledge, the existing philosophy should be revised accordingly.
Simply, look for the stock which is doing very bad when the market or sector is down. For example, look for the stocks, which is 50% down while the market is only 10% down. Wait for the situation where the market creates undervaluation of stocks or pricing inefficiency.
(Property or assets) of a good company should be constant. If the share capital is increasing by the firm, then there must be a purpose to create money in the future.
According to Stuart Walton one should choose the stocks on following basis:
25% on fundamental of stocks.
25% on technical (linearity in trend).
25% on direction of market, different market news and events happening around.
25% on the catalyst and how stock responds to different information (Stock reaction to round numbers)
Debt or loans which are taken by the firm should be lower. Lower debt means a lower amount of money spends on interests taken by the firm. If the debt of the company is rising, then it must have a solid reason, which indicates that the debt will increase the earning of the company in the future.
PE Ratio (Price/Earnings Ratio)
P/E ratio helps us to evaluate the company stocks, which gives information about the stock, whether the stock is overvalued or undervalued. Earning should be growing at least 20% annually.
- Current PE ratio <-> 10 to 15 <-> Undervalued
- Current PE ratio <->15 to 20 <-> Fair valued
- Current PE ratio <-> 20 above <-> overvalued
Holding confused stocks
When you are confused about the stock, mostly while experiment during trading and investing and the stock is loosing. Then, you should sell those stocks and reinvest in the solid stocks that you were trading before. Because sometimes it will be a mistake, even if the stock bounces back because you can utilize that money somewhere else.
Read More: Mark D Cook Trading Strategy.
Know Market Perception
According to Michel Lure, It was the market perception that drove the stocks, not the prevailing fundamentals. Therefore, you should take consideration of the market perception of stocks for trading and short term investments in the share market.
Insider buying is a catalyst for any stocks, which predicts that the stocks are going upward in the future. For example, If the senior executives of the company are buying their stocks mean something good is happening that nobody knows except the company employee. Another example is the company repurchasing its stocks sends a strong message.
Phone Call- Proper communication
It is the best way to know how stocks will perform in the future because you are talking with CFOs, employees, distributors, customers, and competitors. It gives you an overall idea of the company in a deeper way whose stock you are willing to buy. It tells you whether the company is really doing good or doing just a show-off. It also helps you to find something interesting about the company before anyone else knows like launching new products, shutting down of underperforming units, sales, insider buying, and much more which helps you in making decisions.
Read More: Mr. STEVE WATSON Trading Strategy
Believe in your research
“One up the wall street” is a famous book written by Peter Lynch in which he clearly stated that he does your own research and believes in your research. The most important thing, don’t believe the analyst of wall street, and don’t sway away by other people’s opinions.
Change in business
If the company is doing well in traditional business, but, it started to focus on other business completely, which is hot in the market at that time, then it is a red flag. You should get out of that company stock.
The common reason for the failure in trading is Undercapitalization. If you want to make the money at least equal to your earning from your current job, You required a large enough capital. Otherwise, you will think of yourself as a failure because you have worked harder for the trading than you are doing in your current job.
Learn from experiences
This is an important strategy for successful traders. For any trade that is instructive (winner or loser), write down what you learned about the market from that trade. It verified your methodology and also show flaws in your methodologies. From your past trade analysis, you will sharpen your trading skills to reduce the odds.
Value Alone Is Not Enough
Sometimes, value alone is not enough because value alone cannot drive the market. Even if you don’t lose much in buying a value stock that just sits there, it could represent a serious investment a blunder by tying up capital that can be used much more effectively elsewhere. “Is this a better stock than any alternative holding that is not already in the
Hope Is a Four-Letter Word
Mark D Cook advises that if you ever find yourself saying, “I hope this position comes back,” get out or reduce your size. Hope is not a good word in the stock market. Only your hard work and discipline decide your future while trading and investing in the stock market.
Investment Firms Research Reports Will Tend to Be Biased
Many famous Traders and Investors think that the reports published by the numerous research and analytics firms are biased. They mostly write in the influence of stocks related firms. Therefore, avoid such biased stocks related news.
Read More: Mark Minervini trading Strategy
Treat Loss As Tuition Fee
Failure is an important part to get success. According to Mark D Cook, loss in trading and investment is a tuition fee that you paid to teach and learn more about the share market.
Stock investing is not an exact science. The greater the number of useful things you can look at, the greater you increase your odds.
Market supply and demand forces create spectacular pricing inefficiencies. All that is required for successful investing is the commonsense analysis of today’s facts and the courage to act on your convictions.