Once you have determined what business cycle the economy is currently in you can start researching for a trade. It is best to have some sort of system to use before EVERY trade. Here is a simple 5 Step formula to help you get started.
5 Steps to Online Investing:
1. Find a stock
This is the most obvious and most difficult step in stock trading. With over 10,000 stocks to trade, a good rule of thumb to consider is the time of year. For example, as I write this, it is the beginning of spring. It makes sense to consider stocks that are traditionally bullish at this time of year, or bearish if you are bearish.
2. Fundamental Analysis
Many short-term traders may disagree with the need to do ANY Fundamental Analysis, but it is important to know chart patterns from the past and news about the stock. Earnings season can be an example of this. If you are planning to
One may need to be careful when playing a stock that has missed its earnings target in the last 3 quarters on the upside.
3. Technical Analysis
This is where the indicators come into play. Stochastics, MACD, volume, moving averages, RSI, CCI, support levels, resistance levels and all the rest. Whether lagging or leading, the group of indicators you choose may depend on where you got your education.
Keep it simple when first starting out, using too many indicators at the beginning is a ticket to the land of big losses. Get very comfortable using one or two indicators first. Learn their complexity and you are sure to make better trades.
4. Follow your picks
After making a few stock trades you should be managing them properly. If the trade is supposed to be a short-term trade, watch closely for your exit signal. If it is a swing trade, watch for indicators that tell you the trend is changing. If it is a long-term trade, remember to do weekly or monthly checks on the stock.
Use this time to follow the news, set your price targets, stop losses and keep an eye on other stocks you might want to own.
5. The big picture
As the saying goes, all ships rise and fall with the tide. Knowing which sectors are heating up stacks the chips in your favor.
For example, if you are long an oil stock (expecting the price to rise) and most of the oil sector is rising, you are most likely on the right side of the trade. Many trading platforms will give you access to industry-wide information so you can get the education you need.