Whether you’ve been at the stock market game for a month or a year, or longer, there are several methods that can help you reach your profit potential. For decades, people have been using some tried and true techniques to maximize the upside of their trades and turn a hobby into a full-time job. Even if you aren’t interested in following the bulls and bears of Wall Street every day of the week, take time to learn the following strategies. They’ll help you build up your portfolio with solid shares and add to your personal bottom line a little bit at a time. After all, the smartest heads on Wall Street all made their fortunes very slowly, no matter what they say now.
Stick with Blue Chips
Until you’ve been at it for a year or more, stick with the larger, more stable companies. There’s no reason to venture beyond the safety of the blue chips. They’ve all been around for decades, have stable management teams, carry huge capitalization rates and are a good way to earn a nice profit even in a down market. Another advantage is that many of the more established firms pay quarterly or annual dividends. That’s a good way to get some of your capital back even before selling the shares.
Make Rules and Stick to Them
Everyone is taught to develop a set of rules for buying, selling and getting out of deals. The problem is that far too many individuals don’t stick to their own rules and end up blowing out their brokerage account balances. The other thing about your rules is that they should always be written. After a while, they’ll be second nature to you, but for a few weeks you might have to refer to your written document to stay on track.
Learn About Short Selling
Short selling does take a bit of experience, so it’s a good idea to research with an expert and research this informative video before actively taking part. In essence, this is an advanced technique in which you agree to deliver a fixed number of shares for a specific price on a specific day, even if you do not currently hold the stock in your portfolio. Short sales are used if you believe the price of a security will decrease between the time you make the deal and the delivery date. If it does, you stand to earn a profit, less commissions, that is equal to the amount of the price drop, multiplied by the number of units. It’s a tricky kind of deal to make and you should do several tries on a simulator before attempting the technique in the real world.
Use the 2 Percent Strategy
Never place more than two percent of your trading account balance into a single trade. If your account balance is $10,000, for example, the two-percent rule would limit your trades to $200 apiece. The guideline is an effective way of keeping new and seasoned stock market enthusiasts out of trouble.