A person who came from a family that never read The Wall Street Journal never heard about trading, never bought a single share of stock, and never invested in the mutual fund becomes one of the famous Trader of wall street.
Little did he know about the stock market until he was in college and joined the investment course that sparked his interest. He is willing to accept the risk, but not to take risks. “You have to be willing to accept a certain level of risk,” Watson says, “or else you will never pull the trigger.”
In his trading career, he learned some useful lessons which can help and nurture the new Traders and Investors.
Some of his Trading Strategies
Stick to your own beliefs:- He was influenced into buying stocks as advised by his market analyst which was the failure to his success as the market went bearish. That is when he learned his first and most important lesson about the stock market: Stick to your own beliefs. Do the research and believe in your research. Don’t be swayed by other people’s opinions.
Emotionless: – You have to invest without emotions. If you let your emotions get involved, you will make bad decisions.
Risk: – You can’t be afraid to take a loss. The people who are successful in this trading business are the people who are willing to lose money.
Read More: Super-Performance Stock from Mark Minervini
Talk To Stakeholder: –He called CFOs, and told them that he was doing a project for their company, and asked them questions. He also speaks to distributors, customers, and competitors. He told his analysts, “Make the calls. Maybe they won’t talk to you, but I guarantee that if you don’t call, they won’t talk to you.” It helps to know the company and its products and services.
Cheap and Washed out companies: – He looked for the companies that are relatively cheap—trading between eight to twelve times earnings. Within this group, he tried to identify those companies for which investor’s perceptions are about to change.
Read More: Learn From Mark. D Cook for harvesting Stock Market
Typically, these may be companies, that are having trouble presently, but their business is about to turn around. They try to find out that information before everyone else does. Stocks that are trading at only eight to twelve times earnings—any significant change can dramatically impact the stock price. A low price and the prospect for imminent change are the two key components.
- Press release.
- A change that will lead to a dynamic improvement in margins.
- If the Company planned to close down some of their unprofitable facilities an action that will bring their costs down and lead to better-than-expected earnings in the coming quarters.
- A new product.
- A low price and the prospect for imminent change are the two key components.
- Insider buying by management, which confirms prospects for an improvement in the company outlook.
- Find out whether a company is doing better or worse in people’s perspectives.
- One-product company.
Liquidate the position
- When he purchased a stock and the stock moves higher he rotates the money down to another stock with similar qualities as it will ensure to keep the risk/reward of the portfolio as low as possible.
- If you have a better idea. Always ask yourself “Is this a better stock than any other alternative holding that is not already in the portfolio?”
- The reasons for which you went to buy the stock that is no longer valid.
Stock investing is not an exact science. The greater number of profitable things you can look at, the greater the odds may be in your favor.
Similarly, if you are focused on companies with the above trading strategy, it doesn’t mean that these stocks will go up, but it certainly improves the odds which may give you profits.