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.
4. What’s the worst/best that could happen? Trading stocks is risky. While you shouldn’t let that hold you back from making a career as a trader, you also shouldn’t be foolish. Respect the risk and take the time to do a little constructive future-playing before investing in a stock.
Ask yourself this: what’s the worst that could happen? Really think about this rather than brushing the thought to the side. Is it losing money? Or perhaps is it losing respect as a trader? Think about what you could stand to lose before you buy a stock. Sometimes, you might realize that what you fear really isn’t all that bad. But at other times, you might realize that it’s simply not worth the risk for you at this time.
And since this is a two-part question, also ask yourself this: what’s the best that could happen? Could trading this stock open up a new level of trading for you? Could you make a huge amount of money in one fell swoop? Or, maybe you have a good chance of making a small but good profit. Think about this, too. Thinking about both the good and the bad things that could happen as a result of your investment can really help you decide whether or not it’s the best thing for you at this time.
5. How can I apply my past experience? Chances are, this isn’t your first time choosing a stock. So before you settle on the one in question, look deep inside of your inner archives for information that can assist you this time around. For instance, if you had a similar situation wherein you bought too many shares of a stock, remember what you learned from that trade that might help you do things differently this time so that it will work out in your favor.
Even if this is the very first stock you’ve ever chosen, think about your life experience and consider what you’ve learned, what you know, and what your gut tells you. Often, your life experience and learning can inform your decision.
Even with all of the consideration in the world, buying a stock will never be a sure thing. As such, there are a lot of things to consider when choosing stocks. By asking yourself these questions every time you’re choosing a stock, they will help give you the proper focus to make the right decision, right now, for you and your career.
Leave a comment and let me know if you actually plan EVERY trade before you risk your hard-earned money?
Because all the best traders in mydo…