How to Profit From the Stock Market, Essay Example

So you have decided you are finally ready to play the market. You have your copy of the Wall Street Journal, a few numbers of local investment offices, and your checkbook. Now hold on. Put those keys down for one quick minute. What do you know, I mean really know, about the stock market? I have news for you. It’s not just a quick buck for those with money to throw at it.

In order to profit from the stock market, you need to be able to identify three things: your goal and a timeframe for achieving it, the primary trend, and your emotions. Choose a realistic goal and timeframe. An investment lasting from six months to five years is realistic. The type of stock you choose will determine how quickly your money increases. Remember the higher the payout, the greater the risk.

The primary trend is monitored by looking at the 12-month moving average for a stock. The 12-month moving average is a chart that tracks the highs and lows of a stock over a 12 month period. You can find these charts for free at http://www.bigcharts.com and http://moneycentral.msn.com/investor/charts/. Remember, it is time to sell when the line falls below the 12-month average.

This is where emotions come into play. Do not become emotionally attached to your stock. When it is time to sell, sell. But only sell when it is time. Too often, untried investors get nervous when the line nears the average and sell too soon. Don’t make the same mistake as investors in 1929. Ignore the gossip and pay attention to the charts.