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Choose Your Stocks Wisely For Stock Market Trading

Jul 12, 2008
When you enter the tock market for making money then the fundamental difference between you making money or losing money lies in the kind of stock pick you make for trading.

There are several theories about how you pick stocks for trading. All the theories boil down to one thing which is risk vs. reward. That in turn effects what kind of stocks you pick.

If you are willing to take more risk then you will pick stocks that my be more cyclical in nature and are not part of the defensive industries like consumer durables. The defensive stocks generally do not provide huge amounts of upswing in the market but they are relatively stable and safe as far as your money is concerned.

The other kind of traders who are willing to take more risk are people who use day trading as a trading strategy. For day traders the money is made in a single day but then there can be losses in a single day. The day traders generally do not worry about the kind of stock of it is. They are looking at it for a very short term and the next day they will move onto the next stock. The day traders generally tend to buy stocks that are in the news because of various reasons and are in the upswing mode. By the end of the day they would made their money and will sell off the stock.

The stock picking really becomes a science when it comes to long term traders who believe in buy and hold strategy. This kind of strategy needs you to be adept at stock picking. Traders who use this strategy do proper research before making a plunge for that stock, thereafter they hold onto the stock for a longer period f time. The aim for buying these kinds of stocks is that once bought this stock will provide enormous amount of appreciation over a significantly longer period of time. This time period can be more than two or three years. One of the famous investor who has used this strategy is Warren Buffet who has built his riches using this strategy.

Long term investors definitely need to have patience but if they pick their stock right then they never will never face the risk of losing their money in the stock market. So if you are an investor looking to invest in stock market then make sure that you research properly before you make a decision buy a particular stock.
About the Author
The author recommends stock market for beginners as a long term investment vehicle. He also has a website about various stock market for beginners tips.
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