I would like to start investing in stocks, but with so many options I don鈥檛 exactly know where to start. All that I know is that I am looking for a moderate return, nothing crazy. I am also more inclined to do active trading (but maybe not day trading, since I don鈥檛 have enough time). I am not looking however to hold stocks for years. I also don鈥檛 intend to buy penny stocks.
I don鈥檛 plan to blindly follow tips, and. As I still remember the time when a so called 鈥渇inancial advisor鈥?suggested that I put most of my 401K money into XYZ internet stocks. This was in the late 90鈥檚, and you know the rest of the story. Thanks god I resisted at that time!
I know that trading is not an easy thing, but I want to give it a try (and I鈥檒l try to be carefull?). Where should I start looking? What鈥檚 your experience?
Thanks I would suggest you open an account with an online broker like Ameritrade or Scottrade. I suggest you go to your local library and see if they have the Value Line Investment Survey. If they do, an new issue comes out weekly. Value Line rates stocks based on timeliness (what are they expected to do over the next year), safety (the level of risk for the stock) and technical. I use it to do my own research on stocks.
I found that I had to be an investor rather than a trader. The difference to me is that I don't have the nerve to day trade. By investing I don't get so caught up in the day to day of the market and I focus on the companies that I have stock in or am thinking about buying.
It works for me If you dont know what you're doing, the best way to start is with mutual funds. The fund hires someone to manage the stocks in it, and they usually have much more experiance at it than you will. They're also safer than stocks because the fund spreads out the investments over a large number items, so if one does poorly its not devastating. Every stock has it's benefits.
I'd recommend you read some stock investment books and keep an eye on the stock market through Yahoo! Finance.
outside of that, in a few months, you'd have answered your own questions.
Stay away from money managers because in my opinion, they manage a market that is 100% unpredictable. So to say that your going to pay someone to manage your portfolio... well, i'd rather do it myself and learn a hell of a lot more. Go to www.stocktips.in If you only have 5g don't buy individual stocks. Just buy mutual funds or ETF's. Put it all in a total market fund and let it go. Focus more on investing than trading. Start with index funds until you learn more. Learn by reading books first. You'll learn that the market is far better informed than you; the more you trade, the lower your returns in the long run; and diversification is optimal. It looks like you would like Exchange Traded Funds (ETF's). They can be purchased just like any other stock. With over 200 to choose from something is bound to fit. Try www.amex.com they have quite a few ETF's to look at and research. It's a good way to diversify without buying a lot of different stocks. You can buy and sell as little as one share if you so incline to but... well leave that up to you. I answered your other question also, but I'm going to answer this time a little differently, now that I've re-read your question. It seems you are overwhelmed with so many options.
It appears you've already decided to be a market timer, so that involves Technical Analysis. You're looking for the intermediate-term, of the short-term trends; called "Swing Trading" nowdays. It is the trend from one to three days, to as many weeks.
Use your creative side to develop your intuition. Here's some advice:
Without looking at an intraday chart, jot down the price every five minutes from opening to close. Do this for an entire week. Be in tune to the patterns. Where are the Support and Resistance levels? How does price act when it hits these levels? What happens during the last half hour? How long does each intraday price move last?
There is no opportunity in the market that is not an adverse condition situation. The ability to think clearly and have courage when others are in a panic is an element of a successful trader.
Create a written plan. A plan is composed of two primary parts:
1.The blueprint is a preliminary action plan developed before trading begins. Review the plan every few weeks. It is a living document that evolves over time. I always revise my plan for the summer trading season since summertime market conditions call for different strategies.
2.The Journal is a day-to-day microadjustment of the blueprint. This is the document that requires you to adhere to your plan. Emotional aspects of trading on a daily basis are written in here. Questions such as
路Did I follow my blueprint today?
路Did I maintain discipline?
路Did I do the research required?
路Did I recognize support and resistance levels through volume?
路Was my methodology correct?
Ask these questions and answer in your journal. These represent intangible issues that technology cannot capture through a database. If you did the right thing and still lost money, make a note of that. If you did the wrong thing, make a note of that. Other questions should also be answered:
路What was my strategy (earnings play, split, momentum, etc.)?
路Did I exit on fear or logic?
路Did I do the right thing, and do I feel good about my decision?
路Would I make the same trade again in the same situation?
路Did I have confirming indicators when entering the trade?
路Was my discipline followed? Why or why not?
Writing stimulates thought. When you put your plan on paper, it somehow becomes more real than it is when it is just in your mind. Things may seem fine, but in black and white it seems unrealistic or improbable. Nothing is more expensive to a trader than trying to make something happen that is unrealistic.
Another important reason for the plan: you cannot deny it. If the plan says not to hold postions overnight, and you do anyway, you realize you have violated your own discipline. When the plan is only in your mind, it is easy to rationalize it away, and your discipline erodes like the sands of a beach.
If you trade stocks, your biggest bang for the buck is going to be in the $20 - $40 range, but don't stop there. You want high-volume, liquid stocks that are volatile, not stagnant (Beta > 1.0). If you see a lot of gaps in price on the chart, like Oracle, move on and don't trade it.
I don't have enough money to trade stocks right and diversify. So I trade the Dow Index; sometimes the Nasdaq, but the Russell 2000 trends better. The futures are highly leveraged, so stay away from those for a year or two. But you might look at the ETF's (Exchange Traded Funds) on the Dow (called Diamonds, ticker DIA), S&P (Spyders, ticker SPY), and Nasdaq (Qubes, ticker QQQQ). You can diversify across the whole market, are unleveraged, or you can leverage 2 to 1 in a margin account, and don't have to dig out any company information.
If you want to contact me, I can give you a lot of Rules.
Good luck with your trading. Go to www.basetrader.com excellent advice You don't select stocks (That is my job)
If you want to daytrade but you don't want to do it yourself because you are too busy with your business or profession you can hire a Portfolio Manager. (You don't think Tom Cruise (He visits Yahoo! Answers from time to time) actually buys and sells his stocks between film scenes, do you?)
If you need more detailed information about the Stock Market you can drop me a line.
Top 3 Answerer in Business & Finance. (Vote for me) If you ask 50 different people how to pick stocks, you will I am sure get 50 different answers.
Basically though there are two different schools of thought.
The fundamental approach and the technical approach. The fundamental approach looks as the company, its business, its earnings record, its debt, its management, and attemts to find companies that appear to be attractively priced based on these fundamentals.
The technical approach on the other hand ignores the fundamentals and buys and sells stocks base on their chart pattern. There are dozens of books that have been written about how this works. Stock traders in general follow the technical approach. So if you want to trade stocks start by reading up on stock charting and technical stock trading.
I tend to use a combination of the two. If the fundamentals are sound and the chart is bullish, I tend to favor the stock. But I am a sucker for good fundamentals. |
