When it comes to trading and investing you have to do what you believe in, and what you believe doesn’t even have to be true, you just have to believe.
Some people believe that the only way to make money is by buying stocks that trade above $15. Others believe that stocks under $10 is where big money is made. A few believe that stocks need to have accelerating sales and earnings growth. Some believe that stocks with low PE is the answer to picking winning stocks. Whatever it made be, you have to believe in it. Fact is that with the proper risk management the market will give you enough wins to reinforce your beliefs, regardless of the fact if those beliefs are true or not.
I like to focus on the things that are the most important things that make a stock move within my timeframe.
- What are the things that matter the most within your time-frame?
- Is it stocks being above certain moving averages?
- Do the stocks have to be above or below a certain price?
- Do they need to grow their sales and earnings at a certain minimum amount; +15%, 25%?
- Do they have to be a certain percent off their highs?
- Do they have to have a low PE?
- Do they need to be in a current top 20 sector?
This is what you need to figure out, not by reading books from 1920, the 60’s,80’s, etc. but by actually looking presently at what is working NOW within your timeframe. What are the factors that matter the most within your average holding period?
Things change, and what worked in the past won’t necessarily work in the future. If your beliefs about trading and investing come from your own work, then it will be a lot easier for you to have conviction during tough times. If you want to know if stocks need to have to meet certain criteria’s to do well like some book or blogger said then just look at the best-performing stocks within your timeframe to see if it is true or not.