Investment strategy basics

Some investors like to compare the stock market to a supermarket: you go through the isles, pick up the products you like based on marketing and price comparison and buy it. In case you do not like the product- you return it for (hopefully) a full refund of the purchase price.

Needless to say, in spite of the similarities the two markets are not exactly the same. When you buy (or sell) stocks, options, bonds and other securities, you pay commission to your broker for executing your orders. Unlike the supermarket where a full refund can be expected upon return of a defective item, when selling a stock in one of the exchanges you will get a “refund” at the current price of this stock. This could be higher than the initial buying price, in which case you profit; on the other hand, it could be much lower and you lose a part of your savings.

The purpose of investing in the stock market is to choose winning stocks, sell them at a profit and increase your capital. Therefore, it requires that you develop a trading strategy or blend of strategies in advance, a strategy that will fit your plans and tolerance for risk. This can help you avoid making mistakes while potentially bring you profits.

Using a virtual trading platform can help you practice a variety of strategies using real time quotes, and without the risk involved in investing real life savings.

In general, there are two main branches of analyses which are used by investors: fundamental analysis and technical analysis.

The fundamental method concentrates on the business and the financial numbers while the technical strategy deals with the technical details such as the behavior of the stock price over time or the trading volume.Each strategy is composed from many sub-methods.