By Allen Brown
The stock market is experiencing a steady rise despite all the challenges the world is going through right now. With this rise, and so many working from home, it is no wonder that an increasing number of people are hopping on the investment train, putting their money and investing skills to the test in hopes of making a profit on the financial market. This, of course, leads to having a lot of beginners in the game, which isn’t a bad thing, as long as there is willingness to learn. Here is a short guide to help.
The worst-case scenario of experimenting with stocks is ending up short and on the losing end while trading. Hopefully some beginner advice on how to take your trading to the next level will help to reduce those losses, and maybe even help you earn some cash. As stock trading can be a very complex arena, take note that whatever strategies you can learn and use to your advantage is a plus. Gaining knowledge about the market before you begin experimenting can only help in the long run.
Many people comprehend the idea of ‘value investing’ even though they may not know know it by these terms. The gist of it is to find a stock that is undervalued, invest in it as soon as possible, and cash out when it reaches its true value. Knowing how to be a good value investor is not as easy as it sounds; you have to recognize certain patterns on the market as well as keep up with the news on what is going to be the next big thing.
Value investing is one of the basic strategies you can use to strengthen your portfolio. Considering that such stocks are rather cheap to come by, it doesn’t have to be a large investment, but it can yield great results if your judgment was right.
This tactic became well known during the GameStop drama at the beginning of 2021, though it has been used for decades earlier. In short – it is betting that a certain stock will go down in value. Although this can be manipulated if you are a large enough player, it is considered immoral by some. It is advised to make your evaluation and “bets” by using your own assessments and good judgment.
Many companies use this tactic, from the big hedge fund companies as well as smaller brokers that deal in penny stocks. For instance, Timothy Sykes subscription stock-picking service gives examples of how you can trade in this way with penny stocks and how to recognize fantastic opportunities. In short selling, a sale is opened by borrowing shares of a stock that the investor believes will lower in value by a fixed future date. The investor then sells these same borrowed shares to buyers that are ready to pay the market price. Before the borrowed shares should be returned, the trader is betting that the price will continue to decline and they can purchase them for less money, thus making a profit.
This tactic is nowhere near as engaging as those mentioned above, but it still has its merits. Dollar-Cost averaging (DCA) is the method of making regular, relatively small, investments in the market over time. This process can easily be automated so that the money goes to preferred stocks, like those that have just started to rise after a dip, or a similar situation.
As investments happen at regular intervals it means that the average price of an investment will go down as you capture all prices, from high to low. This means that you will have a more stable portfolio, even though it is not theoretically the most profitable.
Keeping a Cool Head
Not a tactic per se, but it is still worth mentioning. Trading stocks is deeply rooted in how the human mind works and many oscillations in the market were caused by mass panic or illogical thinking due to the fear of losing money. This is, of course, not wise to operate out of either extreme, and should be avoided if possible. Try to keep a cool head at all times.
When faced with a dip in any stock value you are given a choice – either to sell, hold or buy. The common logic is to sell before a dip, that is – before your assets lose their value. But by keeping a cool head during that first moment, you can probably judge the situation better and see if the dip will be very shallow, and maybe see that buying is better, as you will end up with more stocks for the next big plunge.
Having a formal financial education just so a person can play the stocks is rare. But even without one, you can still receive an “informal” education by doing some quality researching. explore diverse strategies that can be used on the stock market, and brush up from time to time so your trading can net a profit. So don’t be shy – take your investments to the next level.