Stock market investors must develop an action plan to maximize investment opportunities while minimized losses, advises GorillaTrades.com.
A well-devised plan should follow a few basic guidelines, according to GorillaTrades.com:
- Be patient when entering new trades as some stocks will show returns over time
- Reduce trade risk after a “confirmation day” or time that marks a combination of significant volume and price action
- Spread out the portfolio’s capital to avoid large capital losses
- Consider dollar cost averaging “up”, which involves purchasing shares of a security at successively higher prices, thus reducing the risk incurred by investing a large amount in a single investment
- Pay only the price that coincides with your exit strategy; consider bidding for stocks.
- Immediately assign an exit strategy to each trade you make.
- Diversify your portfolio by making new buying decisions based on a risk rating system that takes into account: a stock’s market capitalization, shares outstanding, volatility, current tradable float, and the possible risk versus the possible return. Rate potential new stocks from 1 to 5, with 5 being the highest risk.
- Trade or invest within your personal risk parameters. Each investor has different goals, objectives, and risk tolerance.
- Always consider the current market environment. A majority of all stocks (3 out of every 4) will follow the market’s overall trend.
- Use a sound, analytical stock-picking system that offers a smorgasbord of fresh stock trading and investing ideas for consideration daily. Avoid penny stocks.