Your trading philosophy or method should have two critical components: buying and selling. While they may share some parts of the decision making process other parts are totally separate.
There are so many types and theories for buying, for investing in the markets that I am going to highlight just a few primary means. The primary means for picking what to buy also have many sub categories.
• Relative Strength Momentum – the definitive discussion is in Michael Carr’s book, “Smarter Investing In Any Economy” (the second edition was released in April 2011 by Traders Press).
• Investor’s Business Daily & the philosophy of publisher William O’Neil, also his books, “24 Essential Lessons for Investment Success” and “The Successful Investor”.
• DRIP investing as explained in the books, “All About Drips and DSPs” and “Buying Stocks Without A Broker.”
• Magazines that provide articles and tips and the best current buys: Money Magazine, SmartMoney, Kiplinger’s and others.
• Newsletters with tips and recommendations for what to buy. There are hundreds with different slants on the markets and different theories on how to evaluate what to buy.
• Books with different approaches to investing. Amazon currently lists more than 600 titles while Barnes & Noble lists more than 100.
• Websites with charts or the ability to screen for buys exist in abundance.
• Software programs for your computer to enable you to pick the best buys. There are a dozen most popular out of more than a hundred programs for you to choose from. Most computer software programs rely on chart analysis. Some programs offer both technical analysis of data and analysis with charts.
While these sources, and others, can provide you with recommendations on what to buy, too often they fail to provide recommendations on when to sell or their approach to selling is simplistic. Knowing when to sell is just as critical as when and what to buy because the action of selling enables you to take profits and make money, lock in profits when an investment starts going down, and to minimize losses.
Magazines and DRIP investing almost always fail, or are too late, to provide good sell signals.
Some investment concepts or methods require you to become an expert with oodles of time or to check and double check different signals for when to buy. In this respect, the amount of time you have to manage your investments becomes a critical aspect in your picking your buy-sell method. Other methods will maximize your limited time with excellent recommendations.
In future articles I will discuss in more detail both some of the particular means of buying I listed above and particular means of deciding when to sell.