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Stock Trading Strategies

The Most Important Stock Trading Strategies

There are two stock trading strategies that every investor must follow. These strategies protect you from disasters. They also keep your holdings open to tremendous gains when things go well.

The first of all stock trading strategies deals with diversification. Any broker or adviser will tell you the same. You do not want to become another one of those headline-grabbing tragedies in which some individual loses everything because he or she invested every last penny in a single stock. If the company behind that stock fails, you could lose it all.

Diversification means more than simply owning multiple stocks. True diversity in your holdings means that you own shares in a broad range of economic sectors. This is where the second most important of the stock trading strategies plays a part.

When you choose sectors in which to invest, look at the areas of the market, which are consistently producing winners. For example, right now you definitely want to be in energy stocks and precious metals. These sectors of the market have been making millionaires and billionaires out of investors.

Applying Stock Trading Strategies

One easy way to apply both of these stock trading strategies is through index funds. These are investments that take your money into a pool of funds and buy a variety of stocks. It is as if you are buying a share of someone else’s portfolio. Each share is really tiny portions of other shares in a variety of companies. Usually, these funds are concentrated on one type of stock, such as oil drilling or gold mining. This method of investment keeps you from suffering great losses if one company goes under. These stock trading strategies, though, leave you open to great gains if one sector becomes hot.

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