Investing tips from SmarTrend CEO Chip Brian
New strategies for new times
Not too long ago, when you bought a stock, it was usually with the intent to hold for some time, especially if it was a blue chip stock. Well, given the volatility of the market and the quick pace of information, that strategy just doesn't hold water anymore. One of the newer investment strategies is "trend trading," which uses mathematically-based, statistically sound trend analysis of the market to help you determine when to make a move.
"Most of these systems use 'moving averages' or 'channel breakouts' to determine the general direction of the market to generate trade signals on individual stocks," explained Brian. "By using this analysis platform, investors can avoid the mistakes inherent in often emotional and fundamentally flawed strategies being implemented by a large percentage of the trading community today."
Not all analysis is created equal
Whether you decide to rely on a strategy like trend trading or range trading, you need to do your research before signing on and paying for any service. Find out how many stocks it covers. Does it offer information in real time or does it analyze the information overnight? How can you personalize the service to fit your needs? How have investors faired using the service? How easy is it to use? How often is the site updated? Does the service provide background information on covered stocks?
Brian said users have to shell out $99 a month for his service but SmarTrend employs proprietary, pattern recognition technology developed over 25 years to analyze more than 5,000 stocks traded on the major U.S. exchanges and OTC/NASDAQ in real time, scanning all the securities every five minutes to determine changes in momentum. Still unsure? SmarTrend offers a 14-day free trial of the full service.
How much to invest?
If you can afford to, set aside at least 10% of your income to save or invest, recommended Brian. It's okay to want more bang for your buck but be wary of claims of high returns for low risk. Given the volatility in today's market, investing is, without question, risky. But doing your homework can mitigate the nail-biting part of the decision.
Spread the risk
Don't put your faith in one stock or sector. Slow and steady is still the smart way to go, too. If you have $1,000 to invest in one stock, buy it in 25% increments over time, advised Brian. "The first $250 should be on an uptrend, and then scale in the rest on subsequent days when the market is lower. This can help avoid the pitfall of chasing a stock and always buying high. If you can average in and keep your cost basis lower, you can minimize risk." Do the same when moving into other sectors. He said that ultimately, you should be invested in at least four to five areas (20-25% in each), building your position over time.