Five Secrets of Trading Stocks

The secrets of trading stocks is known to many traders on Wall Street, and there is no reason why you should not have access to these secrets as well. Trading stocks can be risky, but these five secrets will help you minimize your risks and become more successful trading stocks than ever. Even experienced traders follow these secrets to trade better on the market.

Secret #1

The first secret to trading stocks is to buy without leverage. Only use money that you can afford to lose, and never borrow money to invest in stocks or any other venture. Sure leverage can help you and increase the returns you see when the times are good and everything is stable, but in the bad times the leverage can substantially increase your losses as well. One of the best ways to trade stocks is to hold on to your capital and find stocks that offer you steady returns, instead of a high degree of volatility.

Secret #2

The second secret to trading stocks is to minimize short and long term volatility in your portfolio. Volatility is a bad thing on the market, and can cause enormous losses in a very short time period. Choose stocks to invest in that have a low volatility, and you will be glad for stable returns that are steady, instead of up and down swings. Choose stocks that have an even keel, with a minimal spread between recent highs and lows.

Secret #3

Another stock trading secret is to buy cheap, but to buy only quality stock at a great price. Stay away from stocks which are iffy, and make sure each stock you pick has a high quality. Buy the stock when it is at a very low price, so you do not pay more than you have to. Look at the net asset values of the stock, and buy when the price shows a large discount price. Also look for stocks whose net asset values will go up by at least ten percent each year on a compounded basis. A quality stock is one that has good management that is competent, a business that you understand, and a strong financial position. Look at penny stocks, and find some quality ones that can be found cheaply, then hold on to the while these companies take off.

Secret #4

Stock trading secret number four is to buy stock with the intention of holding on to it. Trading stocks should be a long term position, and the stocks you buy should be worth keeping. There are a few exceptions to this though. The market will always have some volatility in it, and for this reason you should be prepared to hold onto your stocks with the expectation that the company is solid and the stock price will go back up. This is not true, however, if there is an impairment to lower the underlying value of the stock, in which case you may want to sell it now.

Secret #5

The last of the five stock trading secrets is to minimize expenses as much as possible. Many traders want to make a quick profit, but you will be better off by minimizing the number of trades done to build your portfolio. By buying stocks to hold, you will pay fewer trading expenses and commissions, which will save you money. You will also see a lower tax responsibility. Try to keep the commission expenses down as well, and aim for a percentage of your investments equal to one or two percent as commissions. Using these five secrets of trading stocks will help you maximize your profit potential and minimize the expenses and losses you will see.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.