Several factors are involved for being successful in the stock market. First, you must know what to buy. Your stock picks should be popular, and the trading volume really needs to be 100,000 shares per day or greater. The ticker symbols for some of my favorite stocks are: WPRT
, and TLT
A second stock buying consideration would be the fundamentals of your stock. There must be an overwhelming reason for people to want the same stock in order to push up the price. For example, Westport (WPRT) is a designer of natural gas engines for small trucks, 18-wheelers, and Caterpillar equipment. We have plenty of cheap natural gas in America, and vehicles powered by CNG and LNG will become more and more popular as the price of oil rises over time.
A third factor involved in successful investing is knowing when to buy. You want to buy at the bottom of a trend rather than the top. One buying strategy that I like is to compare the stock you want to buy to a bond fund like IEF, the 7-10 year bond ETF. Your stock's chart line needs to be stronger than IEF. For example, SSO is an ETF that tracks the S&P 500. In December of 2011, the daily price line of SSO crossed over the price line of IEF, and it was a great time to buy. The S&P 500 had a multiple month bull run.
Sometimes, though, it can be hard to know when it is safe to buy. In the SSO example above, there was another reason to buy the stock because December is one of the best month's of the year for owning stocks. The summer season is far more volatile. One way to check for safety is to look for a MACD chart uptrend while your stock is in a downward price channel or consolidating. This is called a bullish divergence. The new trend can also be confirmed if the daily price goes above the 20-day exponential moving average.
A fourth factor for winning in the stock market is knowing when to sell. No stock will go up forever, and when it falls, you don't know how far down it will go. Therefore, you need to sell when your stock has a bad chart pattern or whenever the stock market in general is going down. If the S&P 500 is falling, your stock will most likely go down, too.
One of my favorite chart checks is to look at the S&P 100 bullish index
. If the daily index line drops below the 50-day average, it is time to sell your stock because the whole market is going down. You could also confirm this trend by looking at the NYSE bullish
percent index. Other factors confirming the need to sell would be bad economic news.