Tuesday, March 3, 2009

Investment Series Part 2

So I have been playing with the virtual portfolio I created myself at the Virtual Stock Exchange, and I have discovered what many people have told me in the past.  I have often been told, "It's not just seeing the trends, it's executing a strategy that will make you the most money."  So what this means is, you could see a trend developing, but unless you pull the trigger and buy when the stock is at it's lowest, and sell when it's at it's highest, you are leaving money on the table.  Here is at least 1 strategy I have come across and am testing which allows for some tolerance in terms of trying to pinpoint a top and bottom of a stock.  Rather than trying to wait for the absolute bottom price of a stock, you should try to identify a good price for the stock based on research, and then wait for that price to hit.  This price should not be your predicted bottom to the stock price, but rather just a price which you feel is good value for the stock.  Once the stock hits that price, buy SLOWLY, as the stock continues to fall.  That way you are continuing to build your position at more and more ideal prices.  And then do the same type of thing when you're selling on the way up.  Once you have done the research, set a price you want to start selling at, and sell in increments until you've either sold your entire position, or the stock has started back down, in which case you again look to see if it hits a price that you can build your position up again (this is presuming you've done your homework and this is a stock worth owning, if not just look for an exit price even if you have to lose money).  Stay tuned to this blog to find out why you should never "ride it out" with a declining stock.