|Independent Investor - Getting started and building wealth|
Independent Investor - Getting started and building wealth
Managing your own trading accounts can be exciting and more profitable than investing in mutual funds or just buying and holding. Some research and an understanding how prices move are required to make profitable trades. Most people see the stock market as a way to meet their long term investing goals. They place their spare funds in it and hope for a decent return over time. Now there?s nothing wrong with that way of thinking, but here is a more interesting way to look at things.
What if there was a way to use the stock market as a different why, one where wealth is derived from in the first place? What if one could learn how to trade stocks to force the stock market to be a wealth creation vehicle in and of itself?
Most people don?t know how to trade stocks to create a full-time income or create wealth including the so-called professionals. Does this mean it can?t be done?
Most brokers have been taught the proper thing to do for their clients are to research and recommend good long-term investments. Buying and holding has never made anyone wealth. It is the wealthy that can invest by buying and holding.
For any individual investor to start with a small amount of money and turn it into a huge sum it takes a well developed and tested trading system. This system trains the investor how to find good stocks to research and the knowledge and the understanding of how they move.
An overall trend in the price is important to identify because it usually takes a significant event (news, earning, etc.) to reverse it. To do this I recommend looking at a one-year chart for stocks. It may require looking at even longer time frames for some individual stocks.
A good stock to trade is one that has a good technical infrastructure. To determine its technical infrastructure some research has to be done to finds the stocks PE, Book Value, ROI, Earning Estimates, Earning Growth, Income Growth, and compare it to other stocks in the same industry. Other things to consider are its Market Cap and Average Daily Volume.
The current trading price of a stock can give you an idea of how good of a company it is and the risk of owning the stock. Stocks that trade over $25 per share have much less risk than stocks that trade below $1 per share. This is because of two main reasons: 1) Higher price stocks have a better technical infrastructure and therefore be more likely to have major percentages of its outstanding shares owned by mutual funds or other companies which gives the trading price more stability. 2) A small move in the stock price of a low price stock has a much higher percentage change than of a higher price stock.
There are also many websites that will give free stock picks or have people write in there stock picks into a blog. These can be good places to get new ideas but do not relay on what they say, do your own research and come to your own conclusions. Some of these site will have free interactive charts that you can use, however the charts that you have in your personal trading account will have real time data and more options and indicator charts.
An independent investor should start with as much money in there trading account as possible so that they can afford better lower risk stocks. Also it is best to be able to hold multiple stocks so that you will be taking profits more often.
To find more information about trading including specific strategies and professional techniques, go to www.ideal-investing.com. Here you can get all the tools needed to become a successful independent investor.
By Clint Chapman, Ideal Investing & Consulting, LLC