Which strategies are best for novice stock traders?

Which strategies are best for novice stock traders?

If you are new to stock trading, there are a few strategies that can help you maximize your gains.

Short-Term Trading

When entering the world of stocks, it is important not to get worked up about short-term fluctuations too much because they will happen no matter what happens.

 

However, if you aren’t confident in your long-term outlook, then consider taking the opposite approach and go for quick profits by utilizing short term trades.

 

You should have some idea where the price may be heading within a few days or weeks so you’ll need to keep an eye on market news before executing any trades based on them.

 

If you want to try this strategy out first hand before moving onto more complex investments like derivatives or futures contracts, Forex is the best place to start.

Technical Analysis

Increasing your chance of long-term success requires a deeper understanding of market trends, and this can be done through technical analysis.

 

No one can say for certain where the price is going to be several months down the line, but there are ways to assess the value that won’t fall apart as fast as news-based trading might.

 

Technical analysts draw inferences from security prices on charts to determine which direction price may travel next.

 

This method usually employs historical data so its predictions aren’t simply guesswork; even though you don’t know what will happen, you can at least understand why it’s likely to occur.

 

The more historic information available, the easier technical analysis becomes because you can find more consistent patterns.

If you want to go beyond charts with candlesticks and support/resistance indicators, then try downloading a trading software package onto your computer that will give you access to even more historical data for analysis.

Value Investing

If you have been around markets long enough, the name Ben Graham should ring a bell even though he is no longer with us anymore.

 

While his most famous book “The Intelligent Investor” was published in 1949, it is still one of the best written on the subject because of its timeless approach for gauging fair value in stock prices compared to their intrinsic or liquidation values.

 

If you don’t know how liquidation figures are derived, they represent what assets would be worth in the event of a corporate collapse.

 

So when calculating intrinsic values, you’re ignoring all other factors such as growth potential and financial leverage to assess how much a company is worth if it were to shut down its business immediately.

 

There are plenty of ways to value any corporation, but one must be careful about what assumptions they make because they can easily distort the final result.

 

Since this method emphasizes conservatively valuing stocks, consider using it for stocks that appear undervalued based on valuation metrics like P/E ratios or price-to-sales figures because their prices should rise over time if investors come around to your way of thinking.

Managed Futures

Managed futures strategies require less work than stock trading but still provide possibilities for significant returns.

 

While not widely used, this approach is ideal for investors who want to get into the futures market with a minimum of effort because it doesn’t require any specialized knowledge to set up.

 

Managed futures funds are run by managers who have been trained to use computers and software programs to place trades on behalf of investors rather than letting them handle each trade themselves.

 

These funds usually have high fees associated with them so you must be willing to pay more to outsource all trading duties unless you already have the experience yourself.

Forex

When starting in stock trading, many people go straight to Forex (short for foreign exchange) which means they never break off from mainstream markets to gain further specialization in another area like options or futures.

 

Forex is a diverse area that can be used to speculate on price movements or take advantage of different interest rates around the world to generate positive returns over time even when markets are slumping.

 

The benefit to trading currencies versus stocks is that you have a much wider variety of assets to choose from and the costs associated with trading them are much lower so it’s easier to cut losses if things go badly.

Conclusion

No matter how experienced you become in stock trading, your knowledge will always be limited unless you deliberately seek out ways to expand it.

 

The above-mentioned approaches provide new choices for investing opportunities, but there are more out there so don’t ever stop searching for answers about what works best!