February 8, 2008
Current Stock Prices
For most investors, they have their full time job other than watching the stock price movement daily. Stock is investments not jobs. However, that does not mean you should ignore your stock after you have bought it. You have already put your egg in a basket and your job now is to watch it.
Periodic monitoring is needed for any investments. Ideally, you need to get updates of your holdings every three months. This is the period when they report quarterly earnings. This poses another question. If we hold a day job during the weekdays and only have a few hours to spare on the weekend, how many stocks should we ideally hold?
There are people that can research stocks fairly quickly. There are those that can’t. The general guidelines however, it will take one weekend to get updated with one of your current holding. Assuming you do one stock each weekend and you have your ‘free’ time during two other weekends, therefore, you can hold a maximum of eleven stocks. This is because you have to evaluate your holdings every thirteen weeks.
What about diversification? Should we buy more stocks to diversify our risk? Yes, we need to diversify. But what is the use of buying investments that you didn’t research ? If you have no time to research then don’t buy it. It is not worth your time. As stated previously, every investors have different speed of evaluating their stock investment. The more experienced investors are generally faster than novice investors. If you can evaluate two stock holdings every weekend, then you can afford to buy 22 different stocks without having to neglect them. This guideline applies to any other form of investment. Put your egg in your basket and then watch them.
About the Author
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Many traders often come to me with this question, ” How can I know what stocks are going to break out in price?”
Indeed, if you can identify what stocks are going to break out in an explosive move, you can jump on these stocks to trade them before they start to move.
While it cannot be denied that this is a trading technique, and have elements of speculation, we can use technical analysis to help us nail most of these moves by using performance studies on price and volume.
There is a predominant school of thought that volume preceeds price. In other words, we will see an increase in volume of a stock before its price starts to increases or moves up. Some call this the On Balance Volume outbreak.
Irregardless of what technical analysis software you use, you can even have records of price and volume and put them onto a spreadsheet to compute the changes in volume and price of a stock or an index to detect these volume outbreaks.
Many traders have found it is very profitable for them to detect stocks that have undergone a surge in volume of around 50 times its average volume of the past 25 days, but with only a slight increase of around 7% in price.
When you have a situation like this, traders have observed that the stock’s price will soon moves up following the oubtreak in the stock’s volume.
Tweak this technique to your stocks or your trading vehicle and customize it to suit your risk tolerance.
You will find this to be one profitable arsenal that you can add to your box of trading tools!
As always, trading carries risk. So consult your broker, private client adviser or financial planner if you wish to trade.
For more trading ideas, visit Peter Lim’s website at http://signaldot.poolofwisdom.com or at his free Online Guide to Swing Trading http://www.online-guides.info/Swing-Trading/
About the author:
Peter Lim is a Certified Financial Planner and the author of the ebook “Swing Trading for Gigantic Profits” (http://signaldot.poolofwisdom.com).You can have free access to a swing trading course and trading articles from his site http://www.online-guides.info/Swing-Trading/
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