Online Trading: Top Five Winning Strategies

Stock markets are risky business, particularly for a part time trader on a computer sitting at home and not as aware of the market as professional traders might be. As an individual you cannot control or predict the market. All you can do is ride its waves the best you can, and if you get it right you come on the right side of a trade. This is a fact one must accept before stepping in this world. Therefore you cannot risk entry unless you have funds that are completely surplus for the foreseeable future. Even if you intend to be a in the market for short term trading gains, you must at least have the ability to hold long. A trader limited by time is most likely to get hurt in the worst possible way. If you have the ability to hold long and have bought well then your prospects of succeeding increase quite a lot.

I have been trading on the stock markets for over fifteen years and only more lately feel that I have a few strategies that have worked well in real life. My top Five tactics are simple and are discussed below.

Invest in Blue Chips. Junk Shares have this Name for a Reason

One of my earlier tactics was to buy shares with low value, with the simple concept that if they have hit rock bottom, they will eventually bounce back. I lost more than I gained with that. Junk shares don’t typically trade in high volumes and companies may either delist or go insolvent. Then you have nothing. The safest tactic is to stay with established names. I now only touch FTSE-100. I may on occasions drop to FTSE-250 when confident in a companies performance. And it’s worked much better.

Invest in Defensive Stocks Only

I have learnt, again the hard way, that it’s safest to stay with business least likely to be effected by economic conditions. As a rule, any stock I purchase must be FMCG, Pharmaceutical, Utilities, Telecommunication or Oil and Gas. I do not stray into anything else. 

Patience when Buying

Your success depends on what you buy and when you buy. Never rush a decision to buy and never fell pressured to buy just because you haven't traded in a while. A trading profit is the result of a good share purchase at an optimum price. Then selling is very simple.

Growing / Stable Revenues, Profitability and Dividend Yield

Applying this rule to any stock I buy has perhaps been the best move I’ve ever made. Surprisingly, it is not that difficult finding companies that meet this profile. I typically look at the last five years financial data and check revenues, profitability and a dividend yield that must be consistently above 3%. In case I have to hold long, I am at least getting a decent return during the wait.

My ideal stock would be a FTSE-100 pharmaceutical company that has a 10% price volatility as a pattern over the last six months, but also has a history of increasing revenues, profits and a 4% dividend paid twice a year (as interim and final). And I would pick it up when its volatility brings it down to near a six month low.

Target a Conservative Gain and Sell

A single trade has a great probability of making a massive loss rather than a life changing profit. I have, in my investment strategy, decided to accept that as a fact. Now I invest with a simple rule – once an investment hits a 5% gain I will sell. And I have learnt not to regret the sight of a price graph blasting upwards after I sell. If I make a profit, I win. And that is enough for me.

The tactics I talk about are ones I have actually applied in real life and have worked for me. I am in no way an expert in these matters and stress that trading is a high risk business. Consider it more of a hobby than a profession. But if you can beat the market rather than get beaten buy it, it is a lot more fun!

The views expressed in this article represent my person experience only. I would love to hear more from you about what has worked well for you and what hasn’t.