Individuals who want to earn money in the stock market have plenty of choices to make. In addition to picking and choosing specific securities to trade, they first need to select a general trading strategy. Too many enthusiastic people jump into the market without a plan of attack, which can mean financial suicide.
The smart thing is to decide on an approach that makes sense for your level of risk tolerance, your financial resources and the amount of time you can give to the pursuit. Day traders, for example, often make the market their career, devoting every weekday morning and afternoon to the pursuit of profit. For the grand majority of us, however, other methods make more sense.
Peruse the list below and decide which one is the best fit for your personality, budget and schedule:
Whether you have a little or a lot of money to invest, the long-term strategy can be a good fit for anyone. More than half of all people who buy and sell stocks online fall into this category. The beauty of working this way is that you can choose stocks that move slowly and build value over the long-haul. As long as you are patient and not worried about making a kill, this approach makes sense. Those who have self-directed retirement accounts often spend just a few hours each year re-balancing their portfolios. The drop shares that haven’t moved at all, add one or two new companies to the mix and leave it at that, until next year’s readjustment.
If you have a strong stomach, at least $25,000 to put into a brokerage account and a lot of time on your hands, day trading could be your calling. Be ready for a few months of training, many sessions on a simulated platform and about a year of ramping up to full-time activity. Day traders usually hold no positions overnight but take their profits by scalping small price changes on large buys. If XYZ company, for example, is selling for $89.50 per share and suddenly goes up to $89.60, a day trader might buy 100 shares if the market indicates that the price will continue to rise to $90. That would mean a profit of $40 in the span of a few minutes, but 100 shares would cost close to $9,000.
Specializing in One or Two Securities
It’s becoming more common to specialize in just one or two companies. A big advantage to this style is the knowledge that comes with specialization. If you decide to only buy and sell shares of Microsoft and Walmart, for example, you’ll be pretty adept at spotting price changes before they occur.
Profiting from Precious Metal Stocks
Even people who are not keen on Wall Street in general often trade stocks based on the precious metals. This group includes companies that operate in the mining industry, which is a sector unto itself. Additionally, metals enthusiasts can buy and sell exchange traded funds (ETFs) that hold massive amounts of bullion. Silver and gold traders have been using ETFs and mining stocks to play the market for decades.