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Trading Stocks | 4 Strategies You Need To Know

The stock market is risky and unpredictable, but these basics make trading safer. Through a stronger understanding, you’ll make smarter decisions.

Expect The Unexpected…

Since the stock market’s is unpredictable, a well-defined strategy is absolutely crucial. Without it, you’re relying on guesswork and risking emotional decisions that can erode your capital. An example of this occurs with the rise of cryptocurrency. Many people are unfamiliar with how blockchains work, carelessly invest, and end up losing more than double what they invest.

What You Must Avoid!

  • 80% to 95% of day traders lose money, often attributed to impulsive decisions and lack of long-term strategies.
  • Around 50% of all individual investors underperform the market over long periods, indicating potential knowledge gaps impacting their decisions.

Ultimately, the key takeaway is that uneducated investing significantly increases the risk of losing money. This doesn’t mean the stock market is inaccessible to everyone though; it just means that investing without proper education is akin to gambling (the odds of success are stacked against you).

“Risk Comes From Not Knowing What You’re Doing”Warren Buffett

i) Trend Following

Strategy – Identify and follow prevailing market trends.

Why – Trend following allows traders and investors alike to align their positions with the prevailing market direction. Thus, profit potential can be maximized while exposure during reversals is minimized.

ii) Momentum Trading

Strategy – Capitalize on momentum by trading assets, exhibiting strong upward or downward price movements.

Why – Momentum trading leverages the principle of “buy high, sell higher” or “sell low, buy lower.” It aims to capture trends early and ride the wave for optimal gains.

iii) Value Investing

Strategy – Evaluate stocks based on their intrinsic value, seeking those undervalued by the market.

Why – Coined by Warren Buffett, value investing highlights a long-term approach which involves identifying stocks trading below their value, with the expectation that their true worth will be recognized over time.

iv) Swing Trading

Strategy – Capitalize on short to medium-term price swings within an established trend.

Why – Swing trading is best for shorter-term price movements. Moreover, it combines aspects of trend following and momentum trading, allowing traders to benefit from both upward and downward swings.

Questions, Comments, Concerns

So, what do you think about trading?

Do you have any additional tips? Or need any for me?

If so, drop a comment and we can discuss!