Coming up with strategies that will improve their trading is one of the most important things for an investor. And, savvy ones will always be on the lookout for various strategies that produce viable results.
Of course, if you buy low and sell high, you will meet a profit. However, there is a lot more to it than diversifying the portfolio and searching for long-term investments. Of course, those are sound ideas, but they almost never produce incredible results. So, if you want to make it big, you will have to think creatively and learn about the market.So, here are some tips and tricks you should consider.
Avoid the Hype Train
Reading financial reports is a really good way to stay in the loop. However, they tend to be misleading sometimes. So, make sure to rely on your own research and instincts, instead of following what someone else tells you. A lot of huge success stories with startup companies come out of nowhere. And those who chose to invest in them made huge profits. So, if you are serious about investing, it is up to you to trace the next success story. So, keep track of publications, press releases and web pages of various companies. It is not an easy thing to do, but it can really pay off in a big way. Once everyone knows about the rising stock, the price will inflate significantly.
Follow the “Smart Money”
Pro investors who work with over a hundred million dollars in investments, and institutional investors, have to disclose their portfolios to the Securities and Exchange Commission each quarter. While we are not suggesting you straight up copy what they do, these reports can really help you learn about the market. You can see how the biggest institutional investors invest over long and short-term periods.
Dollar-Cost Average Investing
This strategy only works if you truly believe that an investment is worth it long-term. If you are certain that it is a good investment try this approach. Commit to the stock for a period of time, no matter what. Ride out every fluctuation without emotional response or panic selling. Instead, invest a fixed amount of money regularly. And stick to the plan. If the price drops, just buy more stocks (same amount of money) and, if the price goes up, simply buy fewer shares. Make sure that the dollar-cost is affordable to you and test your idea out.
Almost every layman knows that you can profit from a stock that is on the rise. However, you can also make money if you know a stock is going to go down. And you do it by selling the stock that you do not really own. You can borrow a stock and sell it while the value is high. Buy it back once the price drops and return it to the lender. You keep the difference between the two values. However, this can be a risky endeavor, so make sure you are certain the stock will drop and that you will have a buyer for it once the value dips. Just remember to use stop orders since short selling can lead to huge losses if the value of the stock increases.
Stock options are a really powerful tool for those who know how to use them. In essence, they work like insurance for your investments. Call options are actually contracts that give you the right to buy certain stock from the seller by a certain date at a predetermined price. This legal contract is binding. Purchasing calls is a good way to make a profit from stocks that you know will increase in value. However, they are next to worthless if the price stagnates or drops. Overall, you can use a call option to minimize the risk when purchasing a stock you expect to rise.
Put options are the exact opposite of call options. Instead of providing you with the right to buy certain shares at a price they allow you to sell them. You can use put options as a safety net for shares that might drop. So, if you buy a put option before buying the stock that dips in the value, you can be safe. Even if it falls below the value of the put, you will make your money when selling the stock.
In the end
Remember that it is always up to you to make these calls. Of course, these strategies are very useful, and they almost guarantee a profit. But there is a lot of research you have to do in order to utilize them properly. However, if you know a stock will behave in a certain way, there is more than one way to make a profit from it. And these tips should help you a lot.