Want to know the absolute best way to make money in stocks? (Or shares, for our friends across the pond and down under.) The key to making money in the market lies in mastering the fine art of buying low and selling high. Yep. That’s it in a nutshell! However, as anyone who has ever traded in the market knows, it’s a lot easier said than done. That is, unless you use VectorVest!
How does one know when a stock’s price is low?
For those in the US, have you ever watched the squawking heads go on and on about buying stocks as they are going down in price? One personality in particular screams that so-and-so stock is going down in price so now is the time to jump in and buy! The problem with that strategy, if that is what you want to call it, is that you could be buying a stock at the beginning of its downward trend. As Newton’s First Law of Motion states, “an object in motion remains in motion unless acted upon by an outside force.” In other words, if a stock is going down, what’s to keep it from going down? Do you really want to hang on to a stock through what could amount to months and months of bad times just to finally feel vindicated months–or perhaps years–later?
So, when is the time to buy a stock at a low price? You wait until it has stopped going down and started going up. Plain and simple. And you don’t do it right away. You make sure the stock is well on its way up and then you jump on and enjoy the ride.
In order to do this properly, you need to know some fundamentals regarding the stock. You want to know its Relative Value (RV) and Relative Safety (RS). Fundamental investors–those who practice a buy and hold strategy–buy when they see attractive situations.
The value of a stock will rise when
- earnings go up
- inflation goes down
- and interest rates go down
Safety improves with
- outstanding financial performance
- consistent, predictable earnings growth
- above average earnings growth
- steady increases in stock price
- low debt/equity ratio
- high sales volume
Technical Investors–who are short-term traders–time their purchases to when they see evidence of rising prices.
Key indicators of rising prices
- price breakouts
- upward trending MAs (Moving Averages)
- new highs on increasing volume
- a rising market
Important: Market Direction is the single most important factor affecting a stock’s price movement! And the VectorVest Market Timing Graph clearly shows when the market is Rising, Falling, or even Transitioning. The MTI (Market Timing Indicator) graph gives explicit C/Up (Confirmed Up) and C/Dn (Confirmed Down) signals. Furthermore, the Color Guard tells you when it’s OK to buy stocks.
VectorVest also supplies you with strategies you can use for catching stocks on the rise. Under the Unisearch tab, you’ll find a folder called Bottom Fishing searches. Bottom-Fishing is the essence of buying low and selling high! Essentially, these are beaten up, under-valued stocks that have hit bottom and are now recovering. Bottom-fishing strategies work very well after a lengthy downturn.
You don’t need to just wait for downturns to correct themselves, though. Once a rally has continued for 4-6 weeks, it’s fine to begin using momentum searches, e.g., Explosive EPS Stocks II; High VST Newcomers; or Best Stocks Under $20. By switching to stocks in these strategic groups, you can hedge your portfolio to current market trends and continue to make profits (and cut losses).
When do you sell a stock?
Unless you’re a stubborn buy and hold investor, you don’t want to hold on to a stock forever. VectorVest gives clear, unmistakable recommendations on when to sell. You want to sell a stock after it begins to trend downward. The software will tell you if it is time to sell so you don’t exit too early or too late, thus protecting your portfolio from having one or two stocks that take away all the gains from your winning picks.
If you follow along with the Strategies of the Week, each Friday at market close you will get recommendations on what strategies are trending most effectively. If there are any losers in your portfolio, you can replace them with our recommended stocks and cut your losses significantly.
Can VectorVest “predict” absolute troughs and peaks? No. Investing is like the weather in that sense. You can mathematically predict trends, but you cannot foresee the future. So, with VectorVest, you don’t get in the instant that stocks begin their magical rise. Nor do you exit the second they begin to plummet. However, you do get in when they are trending upwards and you do get out when market indicators are negative and the stock is trending downwards. You have assured yourself of a healthy profit, or if you get in at the wrong time, not so much of a loss. By trading this way, you are stair-stepping your way to success!
Want to see our recommended picks and Strategy of the Week? Then start a risk-free, 5-week trial of VectorVest! Put the software through its paces for 5 weeks. Check the strategies and recommendations. Once you see how easy it is to make money on your investments, you’ll wonder why it took you so long to subscribe!