Choosing The Right Stock To Invest In 🚀🔥👆

$ZIM Integrated Shipping Services Ltd.(ZIM)$ 

$Boeing(BA)$ 

I hate the word "random." It includes too much uncertainty for me. But the fact is that in a very strong bull market, you can make a random choice and, in many cases, be better off than listening to a professional.

In strong bull markets, the professionals usually underperform compared to the index. In bear markets, the situation is different. You will need both skills and luck. There is a reason why one of the most famous expressions is "let the trend be your friend." Therefore, it is important to understand "where you are" when you enter the market, and for sure, when you enter the "stock."

And now it starts to get a bit more complicated because your picking strategy should be based on several factors, and these will change every day. Obviously, in bull markets (rising markets), you can allow yourself higher risks, while you must limit your risk in bear markets. The different interpretation of volume in bear and bull markets is not so obvious, which is vital to determining a good entrance and exit point in a stock. But if you understand that liquidity is flowing into the markets in a bull market, the opposite is happening in bear markets. People would seek other safer investments or simply put their money in the bank. Less volume can affect the stock price even more in a bear market.

So how to pick a stock? You don't. You let the stock be picked for you.

If you're a good trader, you have good strategies, and these strategies pick the stock(s) for you. By following a strategy, you will also identify mistakes and learn from them (nature).

Creating a strategy is much easier than you think, but it takes time to create a good one. A good strategy is shaped around your personality and trading capital. If the strategy is not aligned with your personality, it will be tough to follow it. If your God is Elon Musk, and Tesla is your dream car, you will never be able to sell or buy Tesla (TSLA) when you should. If you are not patient, you should never get involved in ill-liquid stocks. If you have limited capital, you should avoid CFDs as nobody can predict the market accurately. Only Kim Jong-Un takes 1 minute to crash all markets in the world.

Defining a strategy - the start.

Defining and making a strategy is not something to be learned in 5 minutes, but I will keep it simple. The first question you should ask yourself is: "how much money do I have?". The second question should be: "how much of it can I lose?"

Earlier I told you there are 2.800 stocks at NYSE. If the answer to question 1 is that you have $1.000 to trade, you should only trade one stock at a time. If you play more than one stock, you will need a higher return on each stock to cover trading fees. If you got $10.000, the answer is different. If you cannot lose more than 20% of your capital, there will no longer be 2.800 shares for you @ NYSE. You will have to remove all penny stocks (stocks under a dollar) since these are too volatile and unpredictable. You will also have to remove all other stocks that are considered high risk (some different parameters can define risk, and we will get to it later). After these few changes, there will be only like 500 out of 2.800 stocks left for you. Still, there is no 100% guarantee that you will not lose 20%, but you have reduced the risk according to your strategy. If it is a bull market, most of the stocks can be a good pick, but if it is a bear market - as few as 2 of the 500 will be a good pick.

The two initial questions make your base. The 3'rd question should be: "Do I want high, medium, or low risk?" If your answer is a high risk, only a few of the 500 stocks will fit your criteria because you already reduced risk in your first question. There are no penny stocks left or other highly volatile stocks, but there is a major difference between buying Boeing (BA) stocks and ZIM Integrated Shipping Services Ltd. (ZIM) from both a technical analysis and fundamental point of view (Check out the gallery below). One can be considered to have more risk than the other. You can have a guess which one. Later, we will determine which parts define the risk and how this can be seen in the chart.

Boeing (BA) Stock Chart

ZIM Integrated Shipping (ZIM)

So far, we have defined 3 points forming your strategy and identified how this would have reduced the number of stocks to pick on NYSE from 2.800 stocks to less than 500. By now, a strategy can be vocalized:

"I will invest $1.000 for trading at NYSE. I will cut my losses at $800 and not invest in penny stocks or stocks with extreme volatility. I will invest in 1 stock at the time, and for all stocks passing my first criteria, I will select stocks with higher risk".

This is by no means a very well-defined strategy but is far better than random stock picking. It will also make many decisions for you. If you lose 20% of your capital, you are out. You will not attempt to re-gain by investing more or with higher risk. You will neither sit in 3 stocks paying $15 in fees, but instead in one stock paying $5. The difference is 1.5% profit, and the other is only 0.5%.

If you got $10.000, the situation is a bit different. The amount of cash will allow you to work your risk differently. While being in only one stock at a time, everything falls and rises within the one stock, but it is different if you have three stocks. In the case of three stocks, it is enough that one stock gets strong gains and the others don't collapse. It is simply a different ball game.

Since strategy reduces the number of stocks you can select, it will also be easier to pinpoint what went wrong if your trading does not yield. When you have been trading for some time, you will realize that stocks and whole sectors move differently. One sector may, for instance, go down or underperform in a strong bull market. This may usually be affected by fundamental news like falling oil prices or some regulations. If you work by your strategy but keep picking stocks from the underperforming sector, you may end up losing money. Your first idea will then be that trading by strategy is just bullshit. But what your strategy needs is to be tuned. If you have some cash, you can easily avoid this trap by having a rule that you will never have two stocks in the same sector.