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Stock buying tips for the novice and new investors

Quick Rules to help novice investors and or any one looking to improve their chances for financial success.    

1. Figure out and write down your objectives for investing in the stock market.  Now come up with a short term plan to achieve your goal, and set up a date to review your plans, and make adjustments.  Realistic time frames to make money in the stock market are much longer than I had initially hoped.    Being too aggressive will probably cause you to lose money in the short and long term.  So try to expand your time horizons for making money to longer time frames, and lower you expectation for the amount of money you would like to maket.  Staying in the invetsing game is most important to expanding your chances of being financially successful in the market. 

2. Consider trading exchange traded funds (ETFs).  ETFs funds are highly liquid.  They often can be traded with less stress because you have alot more buyers, and sellers trading.  This keeps ETF’s proportionately more liquid than the underlying stocks held in the ETF fund.  I am currently trading the Nasdaq Power shares QQQQ options.  This market is very liquid and can be very profitable.  the market is most competively priced to perfection 

2. Focus on buying the best stocks that have a history of revenue and or earnings growth, and predictions for revenue growth in the future. The first two stocks I ever purchased went to zero.  Don’t buy something just because you can affford it.  Buy something becuase it is the best value for what you can afford, and balance this with your time frame goals for investing.  Many of the highest growth stocks have hi price tags that are designed to turn away the novice investors.  Better to buy less shares of a high quality stock than a lot of shares of a stock that may have problems they can not overcome like getting financing or growing its customer base.

3. Sell stocks that have revenue declines, and or no earnings.  A stock that has no growth and or revenues are avoided by intelligent investors. This usually leads to a stock being flat or declining in value over time. Be wary of stocks traded on off beat stock exchanges because they often are unrealistically optimisitic about the future and some may be dishonest in their press releases.

4. Define a list of stocks you would like to watch looking for attractive entry prices, and new devlopments.  Continue to learn and keep track of these stocks. 

5. Buy stocks above the 50 day moving average. This shows the stock is trending higher over time.  You can buy a stock on a retracement to the 10 ,20, or 50 day moving average if it is currently trading way above its 50 day moving average.  This will help you from should help you to avoid some of the noise in the market and use good fundamentals to support your chances of sucess.  You can make adjustment in purchasing price depending on how hard you believe it may be to find an entry into what you may hope to be a sky rocketing stock.

6. Make value entries when strong stocks are oversold.  This is when a stock is believed to be oversold and will likely retrace towards the average trading price of a stock like the 50 day moving average creating a good chance to make a profitable entry point.

7. Think about who the buyers and sellers are in a particular stock are.  Is it value investors, growth investors, and or governments.  Use this knowledge to help figure if there are more buyer or sellers.  Look for articles mentioning top institutional funds investing in the stock, insider buying, and or respected people like Jim Kramer from Mad money to be recomending the stock. 

8.  Set a stop loss to exit a trade if it does not act as you had hoped.   Set a maximum percentage to lose on a trade.  Its important to get out quickly with a 5 or 10% loss to preserve your investment money for trades that work well.  Also set up a plan to exit the trade with a profit. Don’t get to gready or take profits to quickly.  I have found it helpful to sometimes sell  or buy half of a position at one price and the rest at another point.  

   

January 8, 2008 - Posted by | Stock investing links, ideas, and opinions. | , , , ,

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