My overall stock market strategy seems to be changing. I’ve mentioned this already in my blog post – A Trading Strategy Should Be Fluid Like A Stream.
In recent years, I’ve been day trading with much success. Then my day trading hit a wall when back in February 2021, stocks started slumping. It’s only now that I’ve been gaining a foothold again, but I’ve had to change my strategy from day trading and scalping to swing and position trading.
Swing trading involves buying and selling a security (a stock) in the span of a few days to a few weeks, maybe even a month to a month and a half. The idea is to capture an uptrend in the short-term, and hopefully, when that stock is surging for several days. And with a basic buy and hold strategy (without having to short a stock etc) you profit when a stock goes up significantly.
With position trading, the time frames are longer, from a few months to several months to a year. And utilizing the same basic buy and hold strategy, selling the stock for a sizable profit.
Finding the Right Moment When to Buy a Stock
Basically, many of the top stocks will go up over the years. But, the stocks will go through peaks and valleys, so it’s important to watch the 52 week low and the 52 week high, and you want to buy on the dip so you don’t get caught at the top and experience downtrends where the stock goes red.
It’s hard to predict entry points, but one has to strategize, like do cost averaging. Instead of buying 100 shares of GOOG, you buy 25 shares of GOOG in one quarter, then another 25 in the next quarter, and so on and so forth. This is one strategy.
If you are fortunate enough to catch a nice surge that lasts several weeks, you could buy 100 shares of GOOG, sell 25 shares at one profitable point, then see if it goes up further, then sell another 25 shares, and so on and so forth.
This is all with the strategy of active trading vs. long-term investing.
Reading Business News and Developments
It’s been said that billionaire investor Warren Buffett is a voracious reader, and reads at least 5 hours a day, reading all the business news and break news, and world news that could affect the stock market.
As an investor as well as an active trader, one must understand that news can affect the price of a stock, along with so many other factors, investor sentiment, social media sentiment, etc.
One must also be aware of news developments that can affect the sector or industry that a stock belongs in. For example, with this global pandemic affecting everything from our economy to global and political developments, certain pandemic stocks should be monitored as well as the sectors affected by the global pandemic. For example, ZM has been doing well during the pandemic as schools, universities and businesses have used Zoom for virtual meetings as people have been in quarantine. Once the pandemic goes away, how will Zoom be affected by the transition back to a normalized society with countries reaching herd immunity? Or will Zoom continue to be relevant beyond this global pandemic?
Entry Points and Predictions
In the end, we have to make critical decisions when choosing an entry point when buying a stock. And in active trading we typically utilize charts and indicators to determing entry points. Nobody has a crystal ball, but from experience, active traders can develop a skill set that will combine patience, fortitude, intuition, knowledge and creative strategy in buying and selling stocks in order to achieve a profit gain.
It’s a matter of utilizing all the tools in your arsenal to come to a decision when entering and exiting a stock position.