Successful Stock Trading Strategies

There are a number of strategies for successful stock trading

Many investors with cash to spare choose to invest their money in the stock market, hoping to turn a profit. Some investors, such as day traders, develop short-term strategies in which they hold on to stocks for only a few days or weeks, while others invest for the long-term, sitting on their picks for months or even years.

Value Investing

Value investing in a relatively long-term strategy in which investors purchase stock that they believe to be undervalued, often due to short-term trends or other variables unrelated to the company's actual worth. A knowledge of general accounting and a familiarity with financial documents are invaluable in this strategy, as they allow the investor to make sense of balance sheets and financial disclosure forms that reveal a company's assets, liabilities, expenses and revenue.

Seasonal Tendencies

In seasonal-tendency trading, investors attempt to identify the movement of stock prices within certain sectors due to seasonal variations that, as in value investing, are unrelated to the stock's actual worth. Examples of two hypothetical seasonal variations include a rise in defense company stocks during the Olympics, when investors feel a surge of nationalism, or a drop in oil and gas company stocks during the winter, when the price of gasoline generally decreases.

Swing Trading

Swing trading is a short-term strategy in which investors attempt to identify and capitalize on daily or weekly trends in prices. For example, if during a particular week, traders were acting bullishly toward stocks in financial services companies, a swing trader may attempt to purchase these stocks while they are on the rise and then pitch them before the price comes down. Conversely, if investors are bearish on financial industry stocks but the trader feels they have sent the price too low, he may attempt to purchase the stock as it reaches its nadir and then hold it as it goes back up.

Blue-Chip Investments

One of the most conservative and most popular methods of long-term trading is to invest in blue-chip stocks that offer dividends and hold them for a long time. In this strategy, investors will usually purchase a wide range of companies across a number of industries as protection against drops in the price of a single company or sector.

Emerging Markets

Many traders will attempt to get in early on an emerging market and await for other investors to follow suit. Emerging markets can be geographical -- until a few years ago, China was classified as "emerging" -- or confined to a particular sector, such as the rise in internet stocks that emerged in the mid-1990s.

References

• "Short-Term Trading in the New Stock Market"; Toni Turner; 2006
• Trade Your Way to Financial Freedom"; Van K. Tharp; 2006
• "Stock Investing for Dummies"; Paul Mladjenovic; 2009
• "Stock Market Strategies That Work"; Jacob Bernstein, Jake Bernstein, Elliott Bernstein; 2001
• Swing-Trade-Stocks.com: Swing Trading Strategy