Today I wanted to talk about how to master the stock market investing basics. In my last post I talked about the Eight Basics of Stock Market Investing. This is what I suggest to become successful at stock market investing. A lot of people who are investing in the stock market today are looking for a get rich quick scheme. If this is you, you are going to struggle. If you are new to the stock market, you have a unique advantage in that you can know from the beginning that it’s going to take study. It’s going to take daily work. It’s going to take dedication and it’s you are going to encounter your share of mistakes.
What I suggest that you do, is first review that you have indeed chosen a strategy. Many investors fly by the seat of their pants. They have no strategy. Without a road map for your stock market investing strategies to follow, you don’t really know what you are trying to master. If you haven’t chosen one yet or need a review of the basics, check out The Neatest Little Guide To Stock Market Investing. Inside, he review all of the masters from Benjamin Graham to William O’Neil. Get a guru and study his methods. As I’ve mentioned before, my guru is William O’Neil. I talked about his book, How to Make Money in Stocks in my post called The Only Stock Market Investing Book You Should Ever Read. Again avoid the stock market investing for dummies type books. They are too generic.
Go to investors.com After that, what you need to do is start breaking down all of the decisions that you need to make and writing them down. For example, the first thing I do is check each of the market indexes each day. I started a checklist that looks like this:
- Check the price and volume action for the S&P 500
- If the index closed higher on higher volume the market is under accumulation (more buyers than sellers)
- If the index closed lower on higher volume the market is under distribution (more sellers than buyers)
- If the market closed lower on lower volume, this is neutral
- If the market closed higher on lower volume, the market could be stalling
- Watch the IBD TV Market Wrap for analysis of today’s market action
- Confirm my findings of the market action in the IBD Big Picture column
- Review the current outlook
Doing this serves a couple of purposes. One, it forces you to think out each step you need to take. Two, it makes it so you don’t forget a step. As you go along, you’ll want to refine your checklist and have one for each component of your strategy. You’ll find that you’ll fine tune it by moving the actions you take to different spots on your list and adding things here or there.
For every set of decisions you need to make. Put them in order of how you do them. Master one set of checklists at a time. Learn from your mistakes and retool your steps. This is how you master the stock market investing basics.