Choosing which stock to buy is one of the hardest things for beginners to learn to do. It falls right in front of knowing when to sell your shares. With thousands of different publicly traded companies available in virtually every niche one can imagine, the task of finding just a few that you will trust with your hard-earned money can be daunting.
Luckily, there is no right way to choose which companies to invest in. There are thousands of people that sell services that claim that their system is guaranteed to choose companies that will climb, but let’s face it, if they truly had that system down, they wouldn’t be selling it.
The real key is to figure out what works for you. The simple fact of the stock market is that you only have to be right more than 50% of the time. If you can consistently pull that off then you just might be the next Warren Buffett.
They keyword in that strategy is consistency. You cannot be right on 60% of your trades one week, and then right on 30% the next week.
The key to consistency is developing a system that you can stick to, no matter what. This system needs to be in place before you start trading, because once real money is at play, emotions tend to take over and logic goes out the door.
Your system doesn’t have to be, and in fact it shouldn’t be, the same as anyone else’s. You can model it after a mentor or a trusted friend, but everyone’s circumstances are different, thus so should be their systems. Here are three unique systems that people have found a way to make work.
We know our site is about trading stocks, but forex is one of the biggest trends in trading right now and for a good reason. Forex is essentially trading money. Sound confusing? It really isn’t. Forex traders essentially will use the fact that we live in a global economy where money is constantly exchanged to make money. For example, let’s say you go to Mexico. You show up and they trade you some Mexican pesos for your American dollars. They give you a certain exchange rate. A week later you come back to America and try to trade back, but the exchange rate has changed. Suddenly it requires less pesos to equal a dollar, so you made a little bit of side money when you traded back. There are plenty of forex trading strategies you can use that are very similar to trading the stock market.
Elections are guaranteed to have an impact on the stock market. Many studies have been done on just what that impact will be, and the results have been incredible. A U.S. president’s term in office is four years. Typically this cycle involves a tough first two years as far as the markets are concerned. After the first two years the president begins to think about reelection and often ends up passing policy initiatives that drive stronger gains in the markets.
Some investors will put their money into bonds or foreign markets for a year or two during the first term of a sitting president, and then switch to a much higher ratio of stocks later on. Many have seen significantly higher long-term returns with this strategy.
Some traders will only invest in strong brands. Their strategy may be as simple as looking at logo design or brand equity and if it looks like the company has a strong base, buy shares. This type of trader is once again purchasing for the long haul and is not likely to make more than the major indices average in the short run.
This type of trader also has ETFs that they can invest in that build their portfolio almost entirely around that strategy.
Even stranger than election tracking is investors who track the super bowl. While it is not sure if any traders actually use this strategy, studies show that it could work.
The concept is based on a strong correlation between an original NFL team winning the super bowl, and a good year on the stock market. Studies by college professor George Kester have proven a strong correlation between the two.
While it obviously remains to be seen if this trend will continue, this is an example of a strange strategy, that if employed over the last 50 years would have actually worked.
Obviously these strategies are a little more on the silly side. There are plenty of great logical strategies out there to use to build your own.
Remember to never invest more than you can lose!