Stock trading is no doubt a lucrative alternative to earning extra income for all sorts of people, also thanks to online stock trading, people can easily access the Internet and start trading even at the comfort of their homes. Stock trading basically involves the buying and selling of stocks from the stock market and the major goal here is to attain maximum level of profit by adopting and implementing perfect strategies.
There are lots of trading strategies that an online trader can adopt, but as I said earlier, you have to employ the best or top strategies as well as mastering the tricks of the trade so you can earn great profits even while investing small amounts of cash. I believe that the best stock trading strategies are those that keenly advise their investor to keep their risk low and gain more knowledge as they trade.
Related : Why Investing in Stocks ?
There are basically two types of trading strategies, they are Short term trading and Long term trading. The secret to successful trading is to buy stocks that will be favorable to the trader either in the long or short run and this depends solely on his stock trading strategies. It is highly recommended that you invest in companies that are financially strong or are least likely to fail. For instance, if you have stock with companies that have a high possibility of going down, then you can be rest assured that you are going down with them, this is why it is important for traders to be updated on the different stock of companies that are available for them to trade or purchase.
Let us take a look at some great strategies you can implement to maximize your online stock trading chances of earning great profits. Online stock trading strategies do not come in a particular order as there are many of them at your disposal, listed below are some of the best strategies you can implement today;
As I earlier mentioned, there are two types of trading, that is either long term or short term. Well, Swing trading involves the latter (short term strategy) and it is more focused on technical analysis or trend analysis. In Swing Trading, the duration for trading spans for one to five days and in some cases it could last for weeks.
In Swing trading, traders basically analyze stock charts or look for best possible movement of share prices trend, that is to look for patterns when stocks made big upswings or downswings in the past. As a trader, it is required that you spend more time identifying opportunities. In order for you to be successful at this strategy, you have to be conceptually sound and also have an in-Depth understanding of technical analysis.
Buy and hold trading
As the name implies, Buy and hold trading is a long term trading strategy, it literally means what it implies, in this strategy, traders will be required to buy and hold stocks for a long period of time to grow or mature, then sell it at a future date to gain reasonable profit. The great thing about this strategy is that you don’t have to possess the technical knowledge to trade as the strategy doesn’t employ any form of technical analysis. The best plan is to research and select the best stocks with potential value and return, buy and hold the stock for like a year plus, then sell it off to earn great fortunes.
To some traders, Day trading could be the riskiest strategy among other known strategies, this Strategy basically involves trading on a short-term basis and it involves a lot of technical analysis as well as paying close attention and reacting swiftly to different market conditions.
The major idea of day trading is to purchase stock and sell it immediately, basically within the same day or minute of purchase. So, to benefit from day trading you have to be smart and conscious at the same time, this basically implies that you have to be a professional to be able to undertake this strategy.
In Momentum trading, a trader jumps on and rides the momentum of the stock train until the desired profit is reached, once this is achieved, the trader sells his stock and searches for the next momentum trading opportunity. In this kind of trading, traders basically search for company stocks that are moving in a particular direction on a high volume then takes advantage of the momentum to gain desired profit.
In order for you to fully benefit from this strategy, you have to be conversant with the latest company information, and you also have to be familiar with either technical or fundamental analysis. In addition to this, you also have to research and understand stock classification in such a way that you can easily identify a momentum trading stock without fail. Though this may be termed “risky” by many, it also offers great money making opportunities if you can play your cards right.
Penny stocks can be really attractive to trade because of their low cost, as they can trade for as low as $10 a share. However, due to the low value of these stocks, it can be really risky to trade with them. Penny stocks also have low liquidity and this can be very risky to traders.
For you to get involved in penny stocks, you ought to have a knowledge of both fundamental and technical analysis. As a penny stock trader, if you happen to like day trading using penny stock then it is highly recommended that you have the knowledge of technical analysis. Another problem associated with Penny stock is they have low daily volume, which means that it even if you buy the stocks, you may likely have no one to sell them to.
Biotechnology is a major sector for traders to harness and gain huge profits, that is if you are a smart trader, this means that before you decide to buy stocks from any biotechnological companies, you have to conduct an in-depth research on them, so you can be sure of what you’re getting yourself into. Biotech is basically a business of curing various kind of diseases with high standard drugs, and it is sure to be a lucrative venture for investors to harness.
This strategy basically involves buying the large percentage of stock from biotech companies that are undergoing clinical trials as well awaiting FDA’s approval and then raking in lots of cash when the drugs finally gain approval. In selecting biotech companies to invest, you should choose the ones with high potential of success in its testing phase, as this will greatly improve your chances of having great returns of your investment.
CAN SLIM Trading
This trading system is actually one of the most popular long-term online stock trading strategies, it is basically a stock screening strategy that was developed by William O’Neil, this strategy focuses on investing in stocks of growing companies hence it can also be called a growth stock investing strategy. This system makes us of both technical and fundamental analysis to screen stocks. The major aim of CAN SLIM trading system is basically buying good growth stocks before a major price rise. CAN SLIM is actually an acronym of several features that you must consider when screening stock for trading.
C– Current Earnings: before any stock can be qualified as CAN SLIM stock, it should have a major increase in current earnings per share, which should be over 18%.
A- Annual earnings: CAN SLIM stock is bound to also have a great increase in annual earning per share, more than 25%.
N-New: CAN SLIM traders look for the new, that is there must be something new about the stock, they basically search for companies that are under new management, or one that introduced a new product, undertaking a new project etc.
S– Shares outstanding: having less share outstanding is a great trait of CAN SLIM companies, for instance, less than 15 million shares is good, less than 5 million shares are better. In summary, outstanding shares should be less, as this will lead to greater chances of upward price movement.
L– Leader: when trading stocks, endeavor to choose leading companies (Leaders of a market or industry).
I– Institutional Sponsorship: the greater the number of institutional sponsors, the larger the stock size, the better their past performances. In summary, there should be more than 3 institutional traders or mutual funds in the stock you want to choose.
M-Market: For successful trading market timing is important, in this area, traders should make use of technical analysis tools to predict and confirm trends. Basically to buy when all major markets are skyrocketing.
Well so far so good we have explored the major online stock trading strategies, all you have to do is choose the most suitable one that you can undertake, so you can start hitting it big in the stock trading market. You can opt for either the long term or short term strategy or even the both of them, just make sure you have a perfect knowledge of the market before you start trading.