The Compound and Friends: How to Find the Biggest Winners
Investors have many strategies at their disposal. While most studies show that long-term investing can work well with passive investments, there will always be an interest in trading.
The best way to trade is to find stocks that have the best chance of winning. That can lead investors to stocks that can beat the market over the span of a year or more. Traders who can get even one big growth stock into their portfolio can vastly outperform the overall market.
First, traders will get their best results when stocks trade over their 50-day moving average. Typically, the 50-day average indicates whether or not institutions are moving into or out of the market.
In short, it creates a simple way of determining if the market is healthy for trading in the first place.
When institutions are buying, chances are most stocks will trend higher too. And the biggest gainers will see those gains during rallying markets.
Next, traders need to get comfortable with selling. Selling can include taking a profit, even if it means risking out on a position seeing a further gain.
Selling at a loss can be psychologically painful, but it can avoid further losses and free up capital for better trades. Cutting losses can be painful, but losses are inevitable. Keeping losses small is a key part for any trading strategy.