It’s been said that the stock market is the great equalizer of wealth. Traders equipped with both technical and fundamental skills, coupled with emotional intelligence can win big in trading stocks.
Strategies need to be employed in order to execute a successful trading. Passive investing in stock market involves the time-tested buy-and-hold strategy especially for blue chip stocks which have solid financials. However, for active traders, short-term movements of stock prices are where profits are made.
There are various strategies used for active trading, especially for full-time stock market traders. Below are some of the active trading strategies that you can employ:
Trading stocks involve fees. Whether you buy or you sell, there are associated costs in it. You should not buy a stock and sell it at the same price you bought it. This will lead you to a loss. The break-even point is at 1.10%.
That is, the stock should have appreciated by at least 1.10% before you sell it to break even. This only works if the stock broker’s commission is 0.25% which is common to stock brokers in the Philippines.
Use Technical Analysis
There are various ways to analyze the movement of a stock price using charts and candle sticks. I’ve written an article on technical analysis using simple moving average (SMA), moving average divergence convergence (MACD), and relative strength index (RSI).
These technical indicators will tell you when a stock is oversold and overbought or its support and resistance prices so you have a clue when to buy and at what price.
Use GTC Order
Some stock traders tend to neglect the feature of stock brokers called “GTC” or Good-Til-Cancelled. Usually, when you set a price and posted a buy or sell order, that order is only good for the day.
Using GTC order will let you post the order that will be good for 60 days. This is ideal for those who don’t have much time to monitor the price movement of the stock.
Set a Plan
Failing to plan is planning to fail. Set a price plan on your buy and sell strategies. Don’t be too greedy and learn to realize profits as soon as your target percentage gain is reached.
Not all the time you will encounter winning stocks that will make you profit. Hence, conversely, do not be too fearful and learn to set a price for stop-loss for those losing stocks.
News! News! News!
Stock prices move because of news. Make it a daily habit to read news and current events. Inflation rate, corporate earnings, economic figures, oil price, global cues, monetary policies, etc. all contribute to the price movement of a stock.
Active traders can employ one or many of the aforementioned strategies. Just remember to only play the money you can afford to lose. With enough practice and consistent performance evaluation, you can greatly improve your chances of trading winning stocks.