If you want to learn how to invest in stocks, start with a proven strategy for investing in the stock market for beginners. You’ll find that long-term success starts with learning how to keep the odds in your favor and manage potential risk. The current volatility and uncertainty in the stock market offers a clear example of why that is crucial.
Based on a unique study of every market cycle since the 1880s, Investor’s Business Daily’s CAN SLIM Investing System gives you the tools to do just that. It identifies the seven common traits of winning stocks, and provides time-tested rules for how to buy stocks like Nvidia (NVDA) or Apple (AAPL) as they begin to climb higher, when to sell to lock in your profits, and how to time the stock market.
Understand that for both beginning investors and seasoned stock market pros, it’s impossible to always buy and sell the best stocks at exactly the right time. But also understand that you don’t have to be right every time to make money. You just need to learn some basic rules for how to identify the best stocks to watch, the ideal time to buy them and when to sell stocks to lock in your profits or quickly cut any losses.
So scroll down for proven rules on how to make money in the stock market for both beginners and more experienced investors. Be sure to also check out our 2019 Stock Market Outlook to see the seven critical trends to look for this year.
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How To Invest In Stocks: How To Time The Stock Market
Most Wall Street pundits will tell you it’s impossible to time the stock market. While it’s unrealistic to think you’ll get in at the very bottom and out at the very top of a market cycle, there are ways to spot major changes in market trends as they emerge. And by spotting those changes, you can position yourself to capture solid profits in a major market uptrend and keep the bulk of those gains when the market eventually enters a downturn.
The recent market turbulence has reinforced the importance of this approach. The stock market has gone through the three possible stages over the last two months: market in confirmed uptrend, uptrend under pressure and market in correction. To stay protected throughout these changes, follow the No. 1 rule of investing: Always cut your losses short. While you can’t control what the stock market does, this basic rule lets you control how you react.
On Jan. 4, the market posted a follow-through day to launch a new market uptrend.
Learn more about market timing:
- Why Is Tracking Stock Market Direction Important?
- VIDEO: Is It Time To Get Into — Or Out Of — The Stock Market?
- How To Handle Market Uptrends And Market Downtrends
- Not Every Follow-Through Day Works: 2 Red Flags To Watch For
How To Invest In Stocks: How To Buy Stocks
Finding the best stocks to buy and watch starts with knowing what a big market winner looks like before it takes off. As noted above, IBD’s study of the top-performing stocks in each market cycle since the 1880s has identified the seven telltale traits of market winners. Your goal is to find stocks that are displaying those same traits right now. Traits like explosive earnings and sales growth, a strong return on equity, a fast-growing and industry-leading product or service and strong demand among mutual fund managers.
Another key indicator is relative strength. During a downturn or in a particularly volatile market, look for stocks whose RS line is at or near a new 52-week high. It’s a bullish sign of market leadership.
You can instantly see if your stocks get pass, neutral or fail ratings for these telltale characteristics using IBD Stock Checkup. (See how to get pass or fail ratings for your stocks.)
And you can find such stocks in stock lists like the IBD 50, Sector Leaders, IBD Big Cap 20 and IPO Leaders. For example, fast-growing semiconductor designer and artificial intelligence (AI) stock Nvidia was featured on the IBD 50 before it surged 750%. And Apple has been featured on various IBD lists as it has made big moves in recent years. While, of course, not every stock featured on an IBD list will make the type of moves that Nvidia and Apple have made, it does show why it pays to regularly update your list of stocks to watch using these S&P 500-beating screens. (The recent declines in Nvidia and Apple also serve as reminders of why the next section — when to sell stocks — is equally critical.)
Learn more about how to buy stocks:
- Find The Best Stocks To Buy And The Right Time To Buy Them In 3 Basic Steps
- See How To Quickly Find And Evaluate The Best Stocks To Buy And Watch
- Buying Checklist
How To Invest In Stocks: When To Sell Stocks
Beginning investors often spend more time focusing on which stocks to buy and ignore the equally — if not more — important issue of when to sell. Big mistake! Without a sound set of sell rules, you may end up giving back all of your hard-earned gains or, even worse, taking a larger-than-necessary loss.
There are essentially two types of sell rules: offensive rules for locking in your profits, and defensive rules for cutting short any losses. To make, keep and compound your stock market profits, it’s crucial that you learn to use both types of sell rules.
Learn more about when to sell stocks:
- When To Sell Stocks: Take Most Profits At 20%
- When To Sell Stocks: Cut All Losses At No More Than 7%
- Sell Rules For Growth Stocks: Watch For A Big Break Of An Uptrend Line
- Selling Checklist
How To Invest In Stocks: How To Read Stock Charts
When it comes to understanding the stock market for beginners, learning how to read stock charts can be one of the more intimidating challenges. But it doesn’t have to be. Once you understand the key concepts of chart reading and why you should use stock charts, you’ll find it’s not that hard to view charts to time your buys and sells.
Learn more about how to read stock charts:
- Video: Why Use Stock Charts?
- Learn The Basics Of How To Read Stock Charts
- Discover The 3 Most Profitable Stock Chart Patterns
Stock Market For Beginners
Like all worthwhile skills, learning how to invest in stocks takes some time and effort. But the payoff can be life-changing. So start with the basics, and gradually improve your investing skills over time.
Now you may be wondering, how much money do you need to start investing in stocks?The answer is, not much. As IBD founder William J. O’Neil has written, “You can begin with as little as $500 to $1,000 and add to it as you earn and save more money.”
The information and investing strategies above will demystify how the stock market really works and how you can make more money in stocks. And if you have any additional questions, don’t hesitate to ask us. We’re here to help.