I will list different buying and selling strategies and my recommendation on each of them.
I am then going to write a walkthrough for the stock
market based on portfolio sizes. The ranges that I post might not be
exactly accurate, as I am posting writing them from my head, so I
apologize in advance if anything in any of the sections is wrong or not
as effective as it should be.
The 15/30 Method
This one is pretty self-explanatory from the title. The
15/30 method strategy is buying 1000 shares (or as many as you can) of a
company that's at 15 and selling it when it reaches 30.
This is for poor people, or those new to the stock
market. This method helps in the first few months of playing the stock
market, because it's safe and doesn't require much patience. Also, if
you sell 500 shares of the company when it reaches 30, you can keep the
oter 500 in case it increases, and make more money this way.
But ultimately, this is only for the few months of the
stock market. Once your portfolio is at about 90k shares, it's best to
move on th another selling strategy.
The Set Sell Point
Basically, a person puts a firm number on when to
sell stocks - say 50 - and when that company reaches 50, he sells all he
has of it. This strategy is usually used after you outgrow the 15/30
method. It is much better for selling, as it makes much more money than
the other methods, and your portfolio will continue to be
self-sufficient.
The lowest number you should use for this is 50. I
don't think anything lower than 50 will get you much money. Though most
people say that the most successful area is the 60-70 area, you choose
what you are most comfortable with. Some people wait all the way to 90,
while others are happy at 50, but generally, your sell point increases
with your portfolio size. This is a very safe and profitable strategy,
and can be used for your entire time playing the stock market.
*Note:* The higher your sell point, the longer you
will have to wait. So, if you are not too patient, selling at 50 might
be better for you then selling at 70. You make less money, but you wait
for far less time.
Day Trading
This works by buying stocks that are at an already
high point, like 40, and selling them(usually in the same day, hence the
strategy name) when they get higher, like 45. I think you already know
that this is very unreliable and not a safe way at all.
Firstly, you use a lot of money to buy stocks. In the
example above, you used 40k to buy 1000 shares, which is not a good
thing. And secondly, you sold at only a 5k profit, not to mention the
fact that that stock could go crashing down at any moment. It is a bad
idea from start to end. Avoid this.
Conclusion: Put 11 points in this. The last three swords all give 2-3 points to this skill.
Hyperstocking
This works by choosing a few different companies to
always buy, say 5 different types, and sticking to those five forever.
This is not recommended. By hyperstocking, you have only a few types of
stocks, but a huge amountin all of them, like 30k in each one, which
means that if that particular company goes bankrupt, you lose 450k.
Another problem is that some days you might not be able to buy, since
each of your stocks might be at 40+, and it would not be worth buying
them. That and the fact that most stocks only go up to a decent selling
point 1-2 times a year means you'll have to wait a lot.
Another thing is that if you DO have 30k ina certain
stock, each point it goes up in is 30k more to you, which makes it hard
todecide when to sell. Sell at 65? Or at 70? Only 150k difference. One
thing I do like about this, though, is that if you did manage to sell
those 30k at 70, you make 2.1 million, which is nice to brag about. =]
Diversifying (Buying Strategy)
The exact opposite of hyperstocking is diversifying.
This works by spreading out your stocks. Everyday, you look for acompany
that you don't have that is currently at 15 and by doing this, you can
have 25+ types of stocks, which is a very good thing. After you have at
least 1k in every stock you can get, you can then go and try to get 2k
in every type, then 3k, etc. To be honest though, I have never ever seen
a portfolio with which is perfectly diversified. Why?
Because while some stocks remain at 15 for a very long time, and don't
sell very often, others go to 15 once a month, then jump up to 30 and
stay there. This usually means that more often then not, you will have a
unbalanced portfolio, but there is nothing wrong with that, so long as
you have at least 1k in as many companies as possible. Anyway, this is
the most commonly used buying strategy. It sells far more often then
hyperstocking ever would, since by having 30+ types of companies it's
more likely that one of those will raise to 60 then if you only had 5
types.
Not only that, but if a diversifier sells his shares at say 65 and a
person who hyperstocks sells his at 65, they both make the same amount
of money, since each get the same value per stock - 65. The diversifier
also spends less, since he buys 1k shares of a company at 15, while a
hyperstocker might have to buy one of his five stocks at 23 someday, and
has to wait much longer. All in all though, I recommend you stick to
diversifying, but it's your choice. Would you rather get money in small,
but rapid sells? Or wait for a huge big sale?
The next part is a stock market walkthrough based on portfolio sizes.
Teeny-Tiny (0-80k)
Try to have at least 150k before you start playing the
stock market. Also be sure that you can make at least 10k a day, as it
will make things much easier until your portfolio is self-sufficient.
Every day, when you buy, buy at 15 and only 15. By doing this, you pay
the least amount possible for your stocks. There are usually one or two
companies at 15 during the day. Buying any less than 500 shares a day
will make this whole business tough for you. Your objective is to try to
get a large portfolio as soon as you can, and buying 200-300 shares a
day won't make that happen anytime soon.
When you buy stocks, try to diversify. This is the best
thing you can do, since the more types of stock you have, the more
sales will be available, and it's just the best thing you can do at this
stage.
Unfortunately, in the first few months of the stock market, you won't
have many different companies, and waiting for one of them to reach 60
or so will take up a lot of time.
You need a quick—but decent—way to make money from
the stock market while you build up your portfolio, and the 15/30 method
is the best way for you to do that. Especially as a rookie, you should
stick to the 15/30 method of playing the stock market, as it will sell
quite a lot, and it has a pretty decent return (100%, to be exact).
While it may sound wonderful, the 15/30 method isn't a
long-term plan (shouldn't be, actually, if you want to be successful)
because once you get a decent sized portfolio, (i.e. 60-70k) you will
probably sell so often that your portfolio will stop growing. By that, I
mean that you will tend to sell more than you buy, therefore shrinking
your portfolio overall.
Average player (81k-200k)
It will take you 3-6 months to get here. If you were
diversifying from the start, you probably have at least twenty different
types of stock,which will help you a lot. I recommend that you use a
new selling strategy now, since at this stage the 15/30 method won't be
the best option anymore.
As soon as you have 80k in stocks, you should only sell
your stocks when they hit 45. This will slow down your sales a bit, but
you make more money than before. Now you get 200% on each sale, which
is double profit, compared to the 15/30 method. With this method you
also ensure that your portfolio keeps growing.
If you are selling a lot, then you might consider
increasing your sale point to 55 or more. This will help ensure your
portfolio grows further and get even more profit out of your stocks
(266% at 55). And don't forget to keep on diversifying!
Long-Term Players (201k+)
Where you start braggi—I mean, uh, discussing your
portfolio with others...At this stage, you get to use that strange 'n'
spiffy selling strategy which is called the Incremental Sale Point and
works as follows. Choose a sale point, like 60, and choose an
"incremental point" such as 10.
When one of the companies reaches your sale point, you
do not sell all of your stocks, but you sell a certain amount of it. A
good standard amount for this method is around half of your stocks. Keep
the rest, then sell the other half of your stocks in incremental value
(70, 80, etc.) until you sell all of your stocks.
Of course, you don't have to sell half, but any
amount—whatever you are comfortable with - maybe a quarter at every
incremental value. This is probably the most advanced and profitable
selling strategy in the stock market. It's probably your best option in
order for your portfolio to keep growing. However, it requires you to
keep a watchful eye on your stocks. They might increase in an
incremental value while you are asleep or unavailable, resulting in a
missed sale opportunity. If you still want to use the Set Sale Point,
it's best to move to at least 65—the more the better!
Keep in mind…even though I said that the Incremental Sale Point gets
you the most money,you don't have to use it. It's best to use what you
are most comfortable with. By now you probably have a decent idea of
what most stocks sell at, and you probably have your favorites, so
diversifying isn't quite as important here as it was before. At this
point, selling is your top priority. Even so, you should try to have at
the very least 1k of as many companies as you can..
I hope you learned something from each article, or at least enjoyed reading it as much as I enjoyed writing it.
Also, if you sell 500 shares of the company when it reaches 30, you can keep the oter 500 in case it increases, and make more money this way. Investing in the Stock Market
ReplyDeleteOh yeah they have a name for that strategy, Not sure what it was though.
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