After you define which economic cycle the economy is presently in you can start researching for a trade. It is far better have some variety of a system in place that’ll be used before EACH trade. Here’s a straightforward five Step formula to help get you moving.
Five Steps to Investing Online :
1. Find a stock This is the most obvious and most difficult step in stock trading. With well over 10,000 stocks to trade a good rule of thumb to consider is time of the year. For example, as I write this, it is the beginning of spring. It would make sense to consider stocks that traditionally make runs, or slide if you are bearish, during this time of year.
2. Fundamental Analysis Many short term traders may disagree with the need to do ANY Fundamental Analysis, however knowing the chart patterns from the past and the news regarding the stock is relevant. An example would be earnings season. If you are planning on playing a stock to the upside that has missed its earnings target the last 3 quarters, caution could be in order.
3. Technical Analysis This is the part where indicators come in. Stochastics, the MACD, volume, moving averages, RSI, CCI, support levels, resistance levels and all the rest. The batch of indicators you choose, whether lagging or leading, may depend on where you get your education.Keep it simple when first starting out, using too many indicators in the beginning is a ticket to the land of big losses. Get very comfortable using one or two indicators first. Learn their intricacies and you’ll be sure to make better trades.
4. Follow your picks After you’ve placed 1 or 2 stock trades you ought to be handling them correctly. If the trade is supposed to be a short term trade watch it closely for your exit signal. If it is a swing trade, watch for the signals that tell you the trend is shifting. If it is a long-term trade don’t forget to set monthly or weekly checkups on the stock. Use this time to stay up with the news, identify your price targets, set stop losses, and keep a watch on other stocks that you might want to own too.
5. The big picture As the saying goes, all ships rise and fall with the tide. Knowing which sectors are heating up stacks the chips in your favor. For example, if you are long (expecting price to go up) on an oil stock and most of the oil sector is rising then more likely than not you are on the right side of the trade. Several trading platforms will give you access to sector-wide information so that you can get the education you need.
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