How to Trade Stock While Investing
in Stock Market for Long Term

Trade Stock is a Business
How You Can Turn That into Investment
Stock trading doesn’t have to be short term or even medium term only. You can invent your own strategy to make it a profitable venture in the long run. In fact, you can turn short term profits for long term gain.
But, how to do it?

There are two ways to trade stock for long term investing. First of all is by establishing your own stock trading system that works.

No matter which market you are in, you must be able to continuously make money, again and again and again ... and again. The system must answer these questions:

• What is considered as acceptable risks, or how much money you are willing to lose?
• What is the profit target, or how much money you want to make from the trades?
• Which stock to trade or what kind of stock that meet your risk tolerance and profits target?
• Which price pattern or market behaviour is considered money-spinning? You need to study stock trading chart. Stock trading software can do it for you.
• When is the best time to buy, or under what condition the stock price will move as expected?
• What are the parameters to consider while you are in the market? Politics? China effect?
• When is the best time to sell for optimum reward-risk ratio? This can be stop losses or profit taking.
• What is the probability that you’ll be successful for the system to work? This is important for effective money management.

Secondly, trade stock by diversifying your portfolio to various strategies. For example, 40 per cent is for long term stock investing, 40 per cent is for trend and mechanical trading and another 20 per cent is penny stocks and speculative trading.

The ratio can be different from one investor to another, depending on the needs, risk-reward ratio, competency and confidence level.

Don’t forget to fine tune your strategy.

For instance,

Strategy #1: Buy more units as the stock price plummet and slowly cash in if the stock price increases more than 15 per cent in 3 months. Since this can be the best strategy for long term stock investing, buy quality stock ONLY. Quality stocks tend to bounce back after market correction.

Strategy #2: Trade stock that will go up in the next 12 months (e.g. economic boom) with stop loss order if the price is not as expected. From the previous example, you can allocate 40 per cent of the fund for trend and mechanical trading. Medium to high quality stocks in great industry are the best bet.

Strategy #3: Trade stock that have 70 per cent probability for the price to go up but sell if the price dropped by more than 10 per cent from the purchase price regardless of any stocks. You can trade low quality stocks or any penny stocks that are highly fluctuate for short term profits using this method. Tighter stop losses is crucial to limit your risk since it involves junk stocks.

The advantages of having this kind of portfolio are:

• You are focus on the long term investing objectives.
• You can manage your time according to priorities anytime.
• You are able to invest money accordingly no matter how much money you have.

Isn’t that great?

It is just like killing two birds with the same stone, can I say, with the same amount of money you have? If many fund managers can make money this way, you can do it too! The key is about managing risk for maximum profits!

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