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Friday, July 31, 2009

Hot Stocks are A Winning Gamble

By Hannah Page

The strategy in the stock exchange has traditionally been buy low sell high. The strategy of hot or momentum stocks is buy high and sell higher. The idea is to look out for stocks that a rising in price, buy them and then sell when they stabilize or start to decline in value. By trading this way, you don't have to hang onto the stock as long.

Rather than buying undervalued stocks and waiting weeks or months for them to rise in worth, with the hot stocks approach, you buy stocks that are rising in value . Instead of holding the stocks, you wait only a short time and sell them when their value is higher than the price you paid. You turn a fast profit.

This investment plan is especially suited to day traders. You have to be aware of the market trends and select stocks that are showing a conspicuous smooth increase. Buy the stock and after it rises enough to give you a profit, sell it. Don't be tempted to hold onto it beyond making a good profit. This is a strategy, not a get rich quick scheme.

If you pick a stock that starts to stagnate or drop in price, sell it immediately, even if you've got to take a loss. Never think the stock will recover and you will get your investment back. If it drops lower you will lose even more. The idea is to maximise your gains and keep your losses to a minimum.

Hot stocks are temporary investments and shouldn't be held onto for more than a day or two. Keep a lid on of the market trends and your stock prices so you can sell at the most advantageous time. This method of investment has risks and often you'll lose. That's's alright. The most important thing is to chose more winners than losers.

Anyone that is trading seriously in the market should use more than one strategy. Hot stocks are great, but they are regularly high risk. Your portfolio should be diversified, with proven stocks from different business sectors. This helps offset losses and protects your investments. Hot stocks should be part of your investment plan.

These stocks are intended to be very short term investments. Never hang onto a hot stock for more than some days. You sold and the stock continued to rise, you feel like you made losses. You made money, the undeniable fact that the stock continued to rise didn't cost you anything.

If you are employing a broker for your stock transactions, you'll have to pay a fee each time you buy or sell a stock. This will have an impact on your bottom line. There are online trading services that are less dear than brokers for transactions of this sort. If you are considering making an investment in hot stocks, you should look into tactics to save on brokerage fees. This will be substantial when many transactions are involved and could even wipe out your profits.

By investing cleverly and using different investment techniques you can make money in the stock market. Hot stocks are part of an overall investment plan. Your investments should be spread across different financial instruments to protect your principal and maximize your return. Hot stocks can help you achieve your fiscal goals, but shouldn't be your only monetary investment. The exchange can be like the lotto, so bet with your head, not over it. - 23200

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