We all love easy money. What's not
to like? It is often perceived that stock market is the easiest way to make a
few easy bucks.
But what escapes media attention and subsequently ours are the stories where people lose most of their life's savings by going for the kill in the stock market. We love success stories and so we choose to close our eyes and turn a blind eye to the not-so-successful ones. Making money in the stock market can be relatively easy if you have perseverance, enthusiasm and more importantly the aptitude and the knack to predict the volatile stock market.
While making a mistake can often be a disaster, it is possible to avert it as much as possible by going in for smaller investments. In this way even if you cannot completely avoid loss, you can at least minimize to the smaller extent possible. In the greed to make as much money as possible in the shortest amount of time, most people end up going broke. Strategy and planning are a very important part of stock broking and it is the most looked over part as well.
Beginning investors are often misled into believing that there is no such thing as timing the stock market. This fallacy has been passed down on Wall Street to keep you fully invested at all times. All this does is diminish your returns. The fact is that it is possible to time your stock market investments so that at least you are in the market when it's overall trend is going up and you get out when the market is going down.
By studying the market indexes and learning the signals of distribution days and follow through days, you can learn to time the stock market. Once you learn this essential skill, you have more of an opportunity to pick winning mutual funds and are less likely to be buying the funds when the market is working against you.
Trading in stocks on the stock market is typically driven by speculation, based on company news and performance factors. There are two ways to try and find the market value of a stock. Stock value is determined using some type of cash flow, sales or earnings analysis. This form of stock valuation is based on historic ratios and statistics and aims to assign market value to a stock based on measurable attributes.
In the end it all comes down to experience, and you get better at stock market timing as the time goes on.
By Cary Lee Miller
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