Stock Trading Strategies - A Short Introduction

We cannot overemphasize the importance of following the best possible stock trading strategies while engaged as a day trader. With the innately volatile nature of the stock market coupled with the effects of the global recession, the decision to adopt and not to adopt a stock trading plan means the difference between making a profit and suffering a loss.

Of course, you will want to maximize the frequency of profits while minimizing the incidence of losses. You must then choose the right stock trading strategy that will best address your trading style and goals! Here are just a few of the most effective trading strategies.

The most important of these stock trading strategies is to do thorough research on the stocks being considered for trading. When we say research, we are referring to two main types of analysis that all stock traders adopt - fundamental and technical analysis.

Fundamental analysis refers to the analysis of the company's financial statements and, thus, its liquidity, solvency and stability, among other factors. It also involves analyzing the management's capability, the company's competitive advantages and the market in which the company operates in.

As can be expected, it requires analysis of historical and present data. Financial information gathered from fundamental analysis includes growth rates, risk levels, and price/earnings ratio. Indeed, all stock trading strategies use fundamental analysis at one point or another.

Technical analysis requires knowledge of behavioral economics, quantitative analysis and economic forecasting. All of these skills are useful in forecasting the movement of prices using the analysis of historical market data.

When good skills in fundamental and technical analysis are yours to apply, you will have an advantage over other traders. You will know what company to invest in, when to buy and when to sell the stocks for a profit.

But there will be instances when technical and fundamental analyses become too time-consuming because of the deluge of information coming in. Fortunately, one of the best stock trading strategies comes in to the rescue.

We are talking about stock picking software. Basically, this is a computerized application that automates most of the fundamental and technical analysis in choosing the best stock picks. It will screen out the unnecessary data in the deluge of information coming in from the stock market and, thus, focus on the pre-determined set of criteria.

Keep in mind that the human factor is still present. You will still be required to start the process by inputting your desired criteria for the stock picks and then to end the process by telling the software to proceed with the purchase or the sale of the stocks.

We say that both types of analysis and the stocking picking software are necessary regardless of the particular stock trading strategies adopted. Of course, the specific strategy adopted will depend on whether you are a day trader or an investor - there's a big difference between the two.

While the day trader seeks to profit over the course of 24 hours, the investor will hold on to the stocks for as long as possible before cashing in. If you are a day trader, you may like swing trading, roll trading and shorting as ways of profiting from stocks. If you are an investor, you are looking for growth and value in stocks.

In the end, your stock trading strategies will determine how well you do in the market. Pick one now, learn everything possible about it and then apply it to your advantage.