How to Buy and Sell Stocks

You've decided to take the plunge; you have a brokerage account, now what? You need to learn how to buy and sell stocks, you want the top stocks to buy, not just any old stocks, You've come to the right place; this article is going to give you a hand in the jungle of high finance. Start with a book or two or ten and then come up with your own style, that's what I did and it helped plenty.

There's one book that should be read first and that's "How to Make Money in Stocks" by William J. O'Neil. The second book that I love to read is "Reminiscences of a Stock Operator "it's the story of Jesse Livermore. William O'Niel is famous for the CAN SLIM method of finding stocks...profitable stocks (I'm not going to get into it much), you need to read the book. It's basically about buying stock in companies that are making money and finding the companies before everyone else does, because when everyone else gets in on the action, the game is over.

I love Reminiscences of a Stock Operator for the simple fact that I'm taken back to the old days when there was no SEC (Securities Exchange Commission) and there were bucket shops (similar to bookies). Every time I read the book I'm amazed at how similar Jesse Livermore's stock trading days are so similar to now, it leads me to believe that human emotion plays the total role in stock markets worldwide, also, when you here over and over again "it's different today", that's hog wash, it's the same today as it was a hundred years ago.

One other book I should mention is Technical Analysis of Stock Trends written by Edwards and Magee. The books a classic with charts and trading rules that amazingly still apply and will always apply in my opinion. These are three great books about how to buy and sell stocks.

Every investor, speculator and trader has a different style but understanding charts is important. Your probably asking yourself, why the charts? Well as William O"Neil says "would you go on a car trip without a map across North America". Investing, trading or speculating in the stock market is similar because the chart is the road map that shows you where you are inside the market, without the chart your just bouncing around getting frustrated, losing money and quitting.

The first thing to do is find out where you are in the market. Don't listen to the noise on TV, the radio , or the internet, it messes you up. You need to look at the big picture and zoom in, the market is fractal, meaning, the rules for all the chart patterns are the same at all time scales (it's explained in the books), Some people can't read a chart, I had a friend who couldn't get anything out of a chart, Warren Buffett looks at a chart and gets nothing out of it (so I've read), his style definitely works for him, but even Warren Buffett buys when everyone else is running for the hills, he knows the companies he's going to buy in advance based on fundamentals and then buys when his target price is met. Another book to read is Warren Buffett's favorite book, "Security Analysis' by Benjamin Graham and David Dodd. It's a book from the 1930's and it's about value investing, the best way to buy stocks, when they're low.

When you combine technical analysis with fundamentals, you have a powerful combination. The basics for a strong stock: 1. Strong sales growth 2. Earnings momentum that is consistent and up strongly. 3. You want to see a company with a return on equity, management that knows what they're doing. 4. You want companies that have institutions (mutual funds) buying their stock. You want to buy stock in these companies before the institutions do...that's the overall plan. 5. Buy a top stock when the overall market is in a trough, I'm not talking day trading, you make your money holding of a stock when the overall market is in an uptrend.

You need a plan and stick to the plan. A really good analogy is Black Jack, a successful card player has a plan and sticks to the plan, when he or she is counting cards and has had a bad run the last thing you want to do is let emotion take over, as soon as that happens unload your position and walk away, I can't stress this enough. The system you have will make you money; your emotions will bankrupt you, plain and simple.

Comments? Questions? Email Here

© HowtoAdvice.com