Knowing When to Buy and Sell Stocks

how to buy and sell stock online

There are plenty of different secrets to use when you’re investing or trading in stocks. The main thing is that you’ve a plan and stick to it. It is irrelevant whether or not you are a long or short term financier - discipline is the secret to success after picking what stocks to invest in. What you also have to understand is that there isn’t any perfect system out there. Any system you use will have its constraints but at least if you have got a system you’ve a set of rules to sign up for knowing when to buy and sell stocks.

A system I use regularly for knowing when to buy and sell stocks is reliant on three rules and makes the job of purchasing stocks simple to use and understand.

The three rules to the system are :

1. Only buy when the volume is above the long run average.

It is important when purchasing stocks that you purchase a liquid stock. That may be a stock that you can sell simply when required. To do that you want to be sure there’s good consistent volume. Many backers will trade on volume indicators alone, especially for smaller stocks as market announcements will most likely follow increased activity in volume.

You’ll need a chart to apply this rule and all that’s needed is to use a long-term average to the volume chart. If you’re a short term trader then trying an a hundred day average is a good indicator. The rule is to only buy when the price is above the hundred day moving average line.

2. Only buy when three consecutive higher ‘lows’ have been reached.

To apply this rule, you want a bar chart showing daily open and close costs. The brilliant thing about a bar chart is the info contained in each bar. Each daily bar will have a low and high representing the low and high costs reached in the days trading. It also contains two horizontal dashes, one on the left representing the opening price and one on the right representing the final price.

3. Only buy when the price is above the hundred day moving average.

The third rule is to apply a hundred day moving average to you bar chart. One hundred day average is fine for most stockholders except maybe for day traders who may wish to employ a shorter moving average. You only buy when the price is above the moving average. The idea is to only buy stock when they’re in an upward trend. You don’t need to buy when they’re in a falling trend.

The rule for selling is also straightforward. As well as the hundred day moving average you apply to your bar chart, you also include a ten day moving average. This line will reflect any movements in prices faster than the hundred day line. The rule is to sell if the price falls below the ten day moving average.

Remember, the way to knowing when to buy and sell stocks is to be consistent in applying your rules and understanding that they won’t work each time, but it is a lot better than not having any system in any way.