The year 2018 was a challenging one in the stock market, to say the least — not only for seasoned investors, but also for beginners learning how to invest in stocks.
Major indexes followed through and confirmed a new stock market uptrend a couple of times during the first half of the year. The first follow-through day occurred on Feb. 14, but the rally was short-lived. The next follow-through day was on April 10. That one worked a little better despite some early selling pressure that called the rally into question.
Meanwhile, follow-through days later in the year for the Dow, S&P 500 and Nasdaq composite on Nov. 7, and another one for the Nasdaq on Nov. 28, were quickly met with selling.
Learning how to invest in stocks successfully takes time. It doesn’t happen overnight. Mistakes are commonplace, but learning not to make the same mistake twice by studying your past trades is one way to get more consistent results.
Did you ignore the 8% sell rule that says to cut a loss if a stock falls 8% below your purchase price? Or maybe you didn’t nail down a profit when a stock gained 20% after a breakout from a base. Make a resolution to adopt these key sell rules in 2019.
How To Invest In Stocks: 4 Tips For A Successful 2019
A new year is right around the corner. Follow these tips to improve your investment results in 2019:
Follow the health of the broad market. The best time to buy stocks is when the major stock indexes are in confirmed uptrends. Follow The Big Picture column every day to know when the market tide is flowing positive, and when it’s not. If indexes confirm a new uptrend with a follow-through day, make sure the market is serving up bullish setups on a silver platter. Follow-through days that occur without actionable setups should be taken with a grain of salt.
Fish in better ponds. When learning how to invest in stocks, it’s easy to fall into the trap of buying low and selling high. When a stock selling at 50 a share falls to 25, the thought of doubling your money if the stock can rally back to 50 is tempting. But when a stock loses 50% of its value, there are often fundamental problems at the company that aren’t making headlines yet.
Instead, focus on the higher-quality merchandise in the market: Stocks that are going up in price instead of down. Use IBD growth screens like the IBD 50, Sector Leaders, Stocks Near A Buy Zone and Big Cap 20 to find the highest-quality names
Improve chart-reading skills. Learning how to invest in stocks successfully is a matter of identifying a fundamental powerhouse first, then understanding the concept of supply and demand in the chart. Great stock selection combines a fundamental and technical analysis. Stocks with high Composite Ratings will generally pass fundamental muster. The next step is determining if the stock is in a good base, with limited distribution and bona fide signs of accumulation. Leaderboard and IBD Stock Analysis are two powerful technical-analysis teaching tools.
Avoid story stocks. Sometimes, companies can talk a good story, but fundamentals aren’t there to back it up. Only invest in companies with a consistent track record of earnings and sales growth. These types of companies are commonplace in IBD growth screens as well.
Please follow Shreve on Twitter at @IBD_KShreve for more on growth stocks and chart analysis.
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