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Step 1
Research a stock that interests you. Just as you wouldn't purchase a car without carefully examining it first, you should also make sure you know your investment. Read conference call transcripts, visit the company's website and look for articles about the stock in financial publications.
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Step 2
Create a master plan. Decide the range you think the stock has (how high and low you think it will go), and set a target buying and selling price. Ideally, you should buy a stock low and sell it high to make a profit.
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Step 3
Decide whether the stock is a trade or an investment. Do you plan to hold on to this stock for a long time? If so, you may want to put more money in the stock. If you are going to trade out of the stock after it rises a few points, then don't put down an excessive amount in case it doesn't behave the way you predict.
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Step 4
Buy 50 percent of the designated amount of your stock before it reaches its lowest point. You can't be sure exactly when this will be, but once you have identified a stock you like, wait for the nearest decline, and put down 50 percent.
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Step 5
Continue building a position in the stock when it drops another few points. If the stock price rises before it falls again, keep the other 50 percent of the designated amount for the next decline.
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Step 6
Sell your gains in the stock if it rises significantly, but keep your initial investment in the stock if you expect it to go higher. If you plan to hold onto the stock, you should have some objective indicator, such as news of an acquisition that will make the stock go higher.
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Step 7
Cash in on all the shares once you have reached your target selling price.
