When it comes to trading stocks the general consensus is "don't." However, I have found that using psychology and strategic buying / selling tactics one can mitigate risk dramatically.It is also my assessment that active trading is not for everyone. I read a statistic that stated 80 percent of active traders loose all or most of their initial trading investment. Numbers like that suggest that there is certainly a wrong way to trade.
My strategy has been to identify stocks that would likely go up at some point in the not too distant future ( Typically one to six months). I then identify the level of gain I believe I could reasonably expect from that stock in that period (typically 10% to 15%). I then buy the stock and set a limit order to sell at that 10 to 15 percent gain price. The amount of stock that is bought needs to be enough so that the 10% gain will cover commission fees several times over. I try to keep commission fees to 1% of my gain. So if the commission is $10 for each trade you can expect a total commission fee of $20 ($10 for buying the stock and $10 for selling). This means I would prefer a block of $2000 for a $20 commission. This strategy has worked beautifully for me. My gains have been well over the market.
I have also tried day trading and I haven't figured that strategy out yet. My problem with that is the commission eats up too much of the would be gain.
Please let me know your thoughts on trading stock. I am more interested in success stories and strategies than criticism, but I welcome both.
