What questions should you ask before choosing stocks?
How do you choose the right stock? There’s a ton of literature dedicated to this very subject, but seemingly no definitive answer…of course you could watch this free guide on the subject, but that’s time consuming so most people choose not to.
Truthfully, the “right” stocks can be different for different people. While anyone can get lucky, in the long term, a lot will depend on your trading style and how you approach the market.
These five questions will help give you perspective on a prospective stock before you buy. Take a few moments to pause and ask yourself these questions before you trade and see for yourself how making this a habit changes your approach to trading.
1. Do I know what I’m doing? This is not a flippant question, nor is it one that only stock market newbies should be asking themselves. Before choosing stocks, penny stock or otherwise, you have to pause and level with yourself: in this situation, do I feel confident of my knowledge and abilities? Am I well positioned to make a good choice in choosing this stock?
Overall, many a bad stock decision is made because the trader in question simply doesn’t know what he or she is doing. And this can be for newbies and seasoned traders alike.
If you’re a new trader, signing up for the Tim Sykes Millionaire challenge could be your first step in learning how to trade. The program instills detailed knowledge about the market so that you’re prepared to make money.
Even if you’re a seasoned trader, be able to admit when you’re in over your head. If you don’t feel confident in your abilities or your knowledge level before choosing a stock, then take a pause. Take the time to revisit your studies. You should always choose a stock from a place of confidence.
2. Have I done my research? Even if you feel confident in your prowess and education level as a trader, you still have to research every stock, every time. This is not just until you get a feel for the market. This is every single time, whether you’re new to the Timothy Sykes Million Challenge Team or if it’s your thousandth trade. If you have not done your research on a stock, then you are not trading responsibly.
It doesn’t matter what promoter or friend talked the stock up. Do your own research. Look up who the company is, and seek out any updates or developments that might inform your decision to trade. It doesn’t take a long time, but it can make or break a trade–and make or lose you huge amounts of money. This means it is well worth the relatively small amount of time it takes to do. Make doing your research a habit. It will make you a better trader.
3. Will trading this stock take me further toward my goals? Every time you choose a stock, take a moment to consider what it is you hope to gain. Not just from this trade, but from your career in general. Take a moment to reflect on your goals. Then, re-focus on the stock in question. Will this trade be a move in the direction toward the things you want in life?
For example, sometimes stepping outside of your comfort zone and choosing a different type of stock than usual can sometimes help you make a great leap in the direction of your dreams. Alternatively, choosing a stock that isn’t relevant to your strengths and knowledge set might actually take you away from your goals. Know the difference, and know when a stock is a good fit for you. Continue reading