5 Questions To Ask Yourself Before Choosing Stocks

choosing Stocks

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.

Download the key points of this post as PDF.

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 my trading challenge do…

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36 comments

Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

  1. Tim Vaughn

    Thanks Tim, great advice. I usually go through all of these steps, but not always. I could do better at fully planning my trades than I sometimes do, so am working on that. Looking forward to meeting you in Orlando in a few weeks.

  2. OceanRider

    All are very good points. I need to get better at some things and doing more research, definitely need to have more metrics and tracking probability more before entering. I do research but sometimes, lot of times research is just someone promoting their agenda.

    A smart thing that your strategy is based on is going short. This is very profitable as 99% of long traders fail.

    I think I should switch my strategy and try going short against all the junk out there. Most of the small caps are all junk and should be shorted. I really think this has to seriously considered especially since all of your top millionares short.

    Anyway, life calls. Have to run, have kids, wife and life to attend to.

    Thank you Tim.

  3. Javier

    I been asking myself some of these questions Daily… It’s always good to remind urself why ur doing this…

    ALWAYS LEARNING!!!

  4. Trade like a pro

    I feel like this article was just written for me. I. Badly needed to understand this before I trade any stocks! I am your new challenge student and very motivated by you Tim! You r an awesome mentor!

  5. OceanRider

    I am going to make it. I am not stopping until I reach my goal. I will make it and will keep working until I achieve my goal.

    I will not quit.

  6. JR Johnson

    Tim this is my first month in the challenge and the amount of information in your classes is mind boggling. I have watched so many videos in the class that it’s hard to get back to the course videos you sent me. Butt I;m learning and getting beater every day. So I just want to thank you and I’ll see you in September

  7. Katherine Crawford

    Every day I get closer to actually start trading.. I’m so thankful for all the videos and direction. I’m terrified and also grateful for all the support.

  8. Barbara

    These 5 questions plus profitly/sss, and your journal can and will keep me from making all the mistakes. Tim gives us strategies and I’ve herd Gritani, the pilot’s wife, and others say they made mistakes in the beginning, then started over using good habits. By-the-way, please please click on “habit” highlighted above paragraph 1.

  9. Natalie

    Thanks Tim! I just started playing with real money and I’m trying to be 100% prepared before every trade and really wait for the ideal plays to come along.

  10. Patrick Roberts

    I plan the trade, but not enough. Now I feel I should browse for news, the SEC filings, more data overall than just the charts. Doing pretty quick moves — attempting to analyze dip buys based on recent patterns…this nearly my only strategy. It’s been kind to me until today. Today I thought I found the bottom of a bell curve, but I’m actually worried it’ll keep dipping. Plan to cut my loss tomorrow if it dips further, but fingers crossed that the correction I’m looking for occurs.

  11. Clinton

    Hi Tim,
    I am just starting out and, like many I hope, I did not do any of this when I started, which was foolish and I lost money that I really did not want to lose. In fact, AFTER making the trade I did research and before I could sell, it was too late. I learned a LOT about pump and dump and other schemes that affect stocks that are not really logical to what you believe in a company or an IDEA for a stock.

    What I learned since then has been along the lines of how much time you have to investigate not only the stock, but in those who follow a stock. I learned a LOT about how people who sell short can affect a stock that is not heavily traded.

    On paper, a company may look great, it may have a lot of things going for it – some of it expectations, and some of it reality, and there can be a great reason that the stock will do well, but that does not mean everyone wants the stock to go in the same direction, and these large dips can come at ANY time, but likely when a stock has moved a LOT. Chasing a stock has gotten me in more trouble than I would like to admit, no matter how often I warn myself and others warn me. Sometimes you just don’t want to miss out on the rise of a promising stock.

    Also, I have learned that trading has a lot of complexities besides short and long trades. Unexpected news, events, and tweets can effect a stock. Even in large companies, a good report can not always indicate which way the stock goes because of the industry it is part of and how many institutions and computer trading can affect the stock price.

    I respect what you do, and your focus on studying what you are doing – making the research a primary responsibility of everyone who plans to trade individual stocks – whether you are a day trader or just interested in managing your own IRA the same thing applies. Do a lot of research and learn, or get a professional who knows what they are doing manage it.

  12. gloria durst

    I agree that you need to consider what kind of experience you have buying stock. It would be good to consider if you are knowledgeable or at least have researched a stock. My brother is looking to buy some stocks, so maybe he could use some help choosing what to buy.

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