Posted on 29 July 2012.
There are two classes of trading strategies. One strategy focuses on long-term goals and tries to attain them through modest accumulations of wealth and minimum risk. The other strategy treats stock market trading as a way to earn a living in the present. This requires more frequent trading and greater risks because the need for earnings is more immediate. There are some methods that are common to both strategies.
Whether you are waiting for retirement or you are aiming for big returns on a daily basis, you need to keep a diverse collection of stocks, bonds and other investments in your portfolio. You have probably heard a horror story or two about the investors who sank all their money into one business that went belly-up and took all the money down with it. Ultimately, it is up to you to decide how much of your portfolio is dedicated to any particular stock. However, you should always keep specific investments so small that their entire loss would still leave you capable of meeting regular income goals.
Other basic trading strategies center on research. If you are a long-term investor, then you have the time to do serious research about the companies in which you are going to invest your money. You should look at all the fundamentals of a company in this case because you have time to make a considered investment. Review their yearly earnings, their debt loads and their business models.
If you are a day trader making lightning trades in hopes of scoring a big win, then you do not have time to review fundamentals in any depth. You can still think and research, though, before you buy and sell. The best trading strategies for these investors include reviews of recent price performance data in order to learn when a stock price is likely to trend upward.
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