Decide and Have a Strategy

The strategies will depend on if you are a day trader or an investor. The strategies for day traders will not work for an investor and the other way round. Therefore you have to decide if you are going to be a day trader or the investor. Remember that day trading is a full time job and you get married to the trade. Investing is not a full time job but you can make similar money as a day trader makes.

Strategies for Day Traders

The day trader is there to make money for him/her. The strategy for each one is to maximize the income. In this the day trader has two tools Wiz technical analysis and arbitrage. Speed of working and attention to details are the stock in trade for the trader. Since not everyone can become a day trader, we will leave the strategies for each one to be developed separately and will not go further than this.

Strategies for Investors

There can be a number of strategies for investors. Before you go ahead and adopt a strategy or a combination of strategies, it is necessary to follow a strict code of working. The code may not be written but, but it is based on common sense and it is in your interest if you are an investor.

1. Study the market before investing: It is your own hard earned money. You should not be reckless with your investment. Therefore study the market before you investment. Find out if the market trend is up or down.

2. Study the market segment: It is necessary to study market in which your company operates before you purchase the shares of a company. Find out everything you can about the company.

3. Timing of purchase: The share of good company expecting increase in quarterly half yearly or annual results, go up before the actual announcement of results. If you are not sure about the purchasing, avoid purchasing the shares at this time.

4. Rumors about the company: You should avoid buying on the basis of rumors about company. You should also avoid buying on the basis of unconfirmed company reports and tips.

Having done your basics, now you can go for determining the strategy of purchase of company shares.

1. Buy low and sell high: This is the best strategy and everyone will tell you to adopt it. In practice however, a newcomer will find difficult to adopt this in practice. Over a period of time you will be able to fine tune your skills and adopt this strategy.

2. Buy and Hold: This works for nearly all the new entrants in the stock markets. When choosing a company to invest, choose carefully and after a thorough study of the company and the market in which this company operates. However the exit strategies also have to be fixed in advance to ensure that you are not left holding the baby after every one has the profit from company shares. Some options can be

• Exit after your returns from this share are fulfilled in a certain period. The money you have received can be invested in another company promising a higher rate of return.

• Exit to limit your losses. In case the market is falling down, have a predetermined limit below which you are not going to hold the shares of company. This is called stop loss limit and has to be followed rigorously.

3. Buy and Change Frequently: If you have studied the markets carefully, you might find that that there is a limit on the expected gains from shares of a company. If you really have reached this limit, you can exit out of this stock and choose another.

Choose a combination of strategies that suits you the most.

Next Investment Article:
Understanding Simple Moving Averages
Just like in real life, the search for the Holy Grail in trading is never ending. In other words, there has never yet been a system discovered which would always result in profitable trades and never give a bad signal........

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