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Stock Picking Strategies

Data and information to consider when selecting stocks.

It's a fact of life, as an investor, that many (if not most) of analysts' stock picks you'll read about or see on TV won't turn out to be accurate. Predicting market movements in even a very general way is an in-depth and tricky task, and the level of insight and understanding required to make sensible and reliable stock picks on a regular basis is outside the capabilities of the vast majority of investors. Nevertheless, knowing your stock picks and getting them right more often than not is a necessity in investing, particularly if you're an active shorter-term trader, like a swing trader, scalper or day trader. And understanding what makes a particular set of stock picks potentially profitable is half the battle.

What Makes A Good Investment?

So what makes a stock a good investment? The stock's stability or volatility is an important element to consider, and depending on your overall objectives you may elect a stock with one of these characteristics over another. Someone investing for retirement may opt for more stable stocks that carry a smaller degree of risk, given the lack of short-term movement in the stock price. Volatile stocks make ideal picks for day trading and swing trading strategies, providing an opportunity to maximize potential profits (but also losses) through more severe swings in price on a day-to-day basis.

Good stock picks tend to require specific market conditions. Before making a trade, look at overall industry performance and consider how that might impact the way your particular stock will perform. Also take into account the timeframe over which you intend to hold your investment. Make sure your stock picks are in line with your expectations of events likely to occur over that period of time. The more up to date you are with trading patterns and current events, the more realistic it is to expect some success when trading.

Identifying Well-Positioned Stock Prices

Being able to identify stock picks that are riding too high or that are about to take off is one of the most sought after skills in investing, and the investor that takes time to study the price history of a particular security will improve his chances of entering more viable trading positions. As usual, the best approach is to build upon your understanding of the basics of stock trading and examine as many charts as possible when making your stock picks. Be sure to thoroughly review technical analysis charts before executing your trades as well.

Developing A System

Developing your own stock trading system is a process that happens naturally over time. But the sooner you begin to understand your trading style and develop methods to identify good stock picks, the better. Use the data provided by your online broker to analyze stock prices, and identify the circumstances under which you are likely to invest. Online trading platforms like TradeKing provide plenty of data you can use, like advanced reporting features that enable traders to efficiently spot price trends and predict market movements.

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