Learn How to Pick Stocks to Trade
Learning the art of picking stocks is a very important aspect of stock trading. There are literally millions of stocks on the various markets from which to choose. So how do you pick the stocks that are right for your portfolio? Pretty much, some of the same thinking should go into stock picking as with other large purchases that you make. Is the stock I’m considering going to be “just a flash in the pan”, or does it have the potential to grow and make money for me? One realistic assessment should be your ability to risk losing a lot of money in the market. If there’s no “wiggle” room in your financial picture for such a risk, it is important to choose very wisely. What are your short term financial goals? What are your long term retirement goals? There is so much to consider when choosing stocks, particular in this declining economy. Even mutual funds managers have lost a great deal of money during this difficult financial debacle.
Start small – read and learn
Just to test your skills at picking stocks, go to the financial channel on TV and pick a stock (just for practice) to see if you are correct in the assumption that it will go up in value during the day’s trading. Don’t just pick randomly. Pick a stock that might have a chance at increasing in value on the day, even in this economic crunch. For example, an energy stock, a pharmaceutical company, an environmental stock, just to name a few that might have potential growth in this market. At the end of the trading day, check the ticker tape and see how well you did at choosing an upward moving stock. Continue to watch the stock daily and see if there is a continued upward trend. If so, this might be a stock that has potential for your portfolio.
There are websites that host a stock trading game. This might just be another way of trying your skill at picking “winners”. The game at this time is only based on “penny stocks”, but is probably another way to get some experience in how to pick stocks. What are Penny Stocks, anyway? Well, a loose definition of a penny stock might be stocks on the DOW, NASDAQ and S&P that are under $5 or $6 per share.
Always have an exit strategy
Regardless of which option you choose in order to pick a stock, always have an exit strategy, a way to cut your losses. For example, when you purchase a stock you indicate at what price you want to sell the stock. Maybe your stipulation would be to sell when the stock falls below $50. This is known as a Stop Loss Order. Or conversely, you might state that you would like to sell the stock when it reaches $150, if your intention is just realizing a short term profit. Stock market trading is not easy, and it is risky.
Caterina Christakos is a private investor and published author. To get more information go to: http://www.highyieldinvestmentreview.com