BUSINESS & TECHNOLOGY

Effective trading strategies that will expand your investment portfolio

day trading (©Adam Nowakowski)

day trading (©Adam Nowakowski)

Dabbling in various financial instruments can be an amazing way to increase your profit margin and expand your investment portfolio. That is not to say that financial markets are safe for new traders, though. Given the continuous price fluctuations we are witnessing every day, it can be understandably hard to determine when to open, close or hold positions. 

However, this does not mean that you have to lose your hard-earned capital to find a winning strategy. Luckily, there are a set of well-known trading strategies that you can rely on to kickstart your journey and avoid losses when possible. Interested in knowing more? Just check out our guide below. 

 

Focus on day trading.

If you are still a beginner and want to make the most of daily price oscillations without taking unnecessary risks, then you should definitely try your hand at day trading. In a nutshell, day trading is a short-term trading variety that entails closing your position before the end of the day. Of course, this means that you will not have to hold your position for more than a few hours, which is a positive aspect of this sort of trading. To excel at day trading, you must have a steady internet connection since you will need to monitor market prices and fluctuations minute by minute. Experts recommend that you focus on the time window between 9:30 and 11:30 in the morning because it includes the most significant moves of the day.

 

Subscribe to an investment research service.

The stock market is highly volatile, which is why you need all the backup you can get if you decide to invest your capital in it. Fortunately, you do not have to reach out to an expert trader via outdated methods when you have the technology by your side. Nowadays, it is easier than ever to get the financial advice you need; you simply need to subscribe to an investment research service. Based on this in-depth review, you should look for services that are suitable for your skill level, meaning that if you are a beginner, you should not waste time on services that provide high-risk forecasts. Instead, you should focus on finding a service that caters to traders who have low or medium risk tolerance. Generally speaking, an investment research service analyzes your trades, provides you with forecasts, and offers advice to help you figure out your next move. As you can gather, this is, by far, the best way to expand your portfolio through investment without suffering major losses.

 

Say no to penny stocks.

Want to invest only $5 and hit a jackpot? Well, this is not terribly realistic, is it? However, this is what penny stocks are all about, or at least claim to be! If you are unfamiliar with penny stocks, they comprise the shares of small companies that do not have many buyers. The value of these shares never exceeds $4.99. While investing so little and gaining hundreds or even thousands sounds pretty sweet, it rarely happens, given penny’s stocks’ illiquidity. There are some cases where penny stocks can be incredibly lucrative, but these chances are so far and few between that it is best to steer away from such low-cost investments anyway.

 

Don’t risk all your money.

Setting aside some extra money for when the market is especially volatile is a no-brainer, really, but it is still logical to assume that not everyone likes to play it safe. If you want to achieve short-term gains, then you should never invest all your money in trading. Seasoned traders usually risk only up to 2% of their trading capital, and you should certainly do the same. It is easy to become overconfident and lose all your profits by making one bad trade! So, play it smart and devise a long-term contingency plan.

 

Hold onto your position.

Some favor long-term forms of trading over short-term ones like day trading. Position trading is one of those long-term varieties that depend on holding onto your position until new trends establish themselves and then close it when you are sure you will turn a profit. 

This strategy can be greatly beneficial to hedge against the sudden fluctuations that usually occur between trends. Nonetheless, it requires a lot of research to project when the trend in question will stabilize. You cannot also employ this strategy in highly volatile markets since trends can change every day or even multiple times within the same day.

 

Ensuring that your portfolio grows through trading can be an arduous, time-consuming process, but it is also highly rewarding, given that you play your cards right. Whether you are a fan of short-term strategies like day trading or prefer a more long-term, methodical approach like position trading, you are guaranteed to make considerable profits using our previous tips. The key, though, is to be patient and devote your time to studying the market to increase your chances of generating income.

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