PICKING STOCKS AND PLANNING TRADES

CHAPTER 10
INVESTING
PICKING STOCKS AND PLANNING TRADES

Stock picking in many ways is as good as choosing a spouse for you. There are lots of options available to you if you have money. Once you have decided that you want to invest in shares, the biggest question which comes to the mind is how to I buy stocks? How do I plan my trades?
It is up to you to decide in which category of investors you want to be and which strategy you would follow

GROWTH INVESTING STRATEGY
IF you are kind of optimistic investor, then this strategy is good for you. Here the investor foresees the growth of the company’s earnings and invests in it. This type of strategy is considered to the best for beginners in the stock market.

VALUE INVESTING STRATEGY
Benjamin Graham and David Dodd both professors at Columbia Business School, and professors too many big investors, are known as FATHER of this strategy.
In this strategy, the investors tend to buy stocks whose price has recently fallen and are available at cheap prices. But you have to be careful, value investing does not mean “JUNK “.Investors has to do their homework on the companies, and distinguish between the value company and the companies with declining prices. The company should have its fundamentals healthy to prove its worth.

DIVIDEND INVESTING STRATEGY
In this strategy the investors, buys stocks which pay dividends regularly to them on quarterly or yearly basis... The choice of companies in this strategy should be sound and healthy. This strategy may not be the sexist strategy, but in the long run, this time tested investment strategy would definitely yield returns.


CREATING A STOCK TRADING PLAN

If you want to build your wealth, keep your wealth and grow your wealth you should have a solid Stock Trading Plan .A stock trading plan is a fixed set of rules and actions which formulate your trading strategy. Every trade you do should be governed by your trading plan.
Your trade plan is your road map to tell yourself and affirm yourself and reach your goals.
You will have to consider certain criteria for your plan like,
1. When to buy the stock, i.e. the timing
2. Price of the stock
3. Current news about the stock
4. Liquidity of the stocks
5. How long to keep the stock i.e. to hold them
6. When to sell the stock
7. What to do when the prices of the stock does not move. Etc

You can think of other aspects as well, but the above is the major point s you have to consider.
Once you have made a plan, mock run of the plan in the stock market which will help you to know if your plan is effective or it needs amendments.