Your trading philosophy or methods should have just two critical components: buying and selling. While they may share some parts of the decision making process, other parts are totally separate.
There are so many theories for buying…for safe investing in the markets…that I am going to highlight just a few key examples. The primary means for picking what to buy also has many sub-categories such as:
- Relative Strength Momentum – the definitive discussion is in Michael Car’s book; Safe Profitable Investing with Relative Strength (released in September 2013).
- Investor’s Business Daily & the philosophy of publisher William O’Neil – and his books; 24 Essential Lessons for Investment Success and The Successful Investor.
- DRIP Investing as explained in the book;, All About DRIPs and DSPs and Buying Stocks Without a Broker.
- Magazines that provide articles and tips and the current buys; Money Magazine, Kiplinger’s, and others.
- Newsletters with tips and recommendations for what to buy. There are hundreds on the shelves all with different slants on the markets and different theories on how to evaluate what to buy.
- Books with different approaches to investing. Amazon currently lists more than 600 titles while Barnes and Noble lists more than 100.
- Websites with charts to screen for buys exist in abundance.
- Investment Software Programs for your personal computer that will allow you to pick the best buys. There are a dozen really good programs in a sea of more than a hundred programs, so choose very carefully. Most computer investment software programs rely on chart analysis. Some programs offer both technical analyses of data and analyses conducted with charts.
Selecting Your Buy & Sell Method for Safe Investing- While these sources (listed above) and others can provide you with recommendations on what to buy, too often they fail to provide recommendations on when to sell. Even if they do discuss selling, their approach to selling is so simplistic it is useless. Knowing when to sell is just as critical as knowing when and what to buy because the action of selling is what generate profits and allows you to make money, lock in profits when an investment starts going down, and minimizes losses.
Magazines and DRIP investing almost always fail their information comes too late to provide good sell signals.
Some investment concepts or methods require that you practically become an expert in the market and have oodles and oodles of time to check and double check different signals for when to buy. In this respect, the amount of time you have to manage your investments becomes a critical aspect in determining your buy-sell method. Other methods may be able to better maximize your limited time and still give you excellent recommendations.
Raymond M.F. Dominick is the author of “Invest Safely and Profitably” (Your Success Guide), available from Amazon.