Stock Market Strategies That Work

Do your own research and possibly outperform your broker.

Goodshoot/Goodshoot/Getty Images

Savvy investors are eager to find stock market trading strategies that not only sound good but actually produce positive results. The conventional wisdom of buying low and selling high, diversifying your portfolio and looking to long-term investments are normally sound, but they rarely produce dazzling results. More active and creative approaches can help you mix up your investing style, learn about the market and make big earnings.

Don't Believe the Hype

Financial reporting is often misleading at best. Rather than relying on someone else to tell you what to do with your money, do your own research and find out what looks good to you. Many obscure startups that explode onto the scene only get noticed in retrospect. It's your job to find the next big thing before it's big by keeping track of industry publications, directly reading the press releases and websites of interesting companies and networking with your friends and colleagues with an ear for what people are talking about.

Track the "Smart Money"

Professional investors who manage more than $100 million in investments and big institutional investors are required to disclose their portfolio information to the Securities and Exchange Commission every quarter. Instead of listening to analysts and reporters, check out these reports to see what the big earners are actually doing with their money. This can reveal investment spreads and methods that work over the long term and even short-term best bets.

Dollar-Cost Average

If you fundamentally believe that an investment is worthwhile over the long haul, try a dollar-cost-average approach. Make a commitment to try a stock for a specific period, no matter what happens. Invest a certain amount of money at pre-established time intervals. This way, instead of being swayed at the first sign of popular panic or euphoria, you purchase more shares when the price is low and fewer shares when the price is high, ensuring a consistently profitable value.

Short Selling

Short selling gives you an opportunity to make money on a stock that is declining in value. The idea is to sell the stock before you actually own it. To short sell, you place an order for the stock and then sell it quickly at a higher value, collecting the difference in what it originally cost and what you sold it for. This can work in industries that are obviously declining in value, but it can be risky if you cannot find buyers for the shares.

Call Options

Stock options can function somewhat like insurance policies for your investments. A call option is a contract that gives you a binding legal right to buy stock from the seller of the call at a predetermined price, by a certain date. If the value of a stock doubles after you have purchased a call, you can then buy it at half price. If the price drops, however, the call becomes worthless.

Put Options

Put options are the opposite of call options, giving you a legal right to sell shares to the investor who sold you the put, at a certain price, by a certain date. If you buy a put option and then purchase the stocks when they dip below the selling value established by the put, you are guaranteed to make money when you sell them back.

Video of the Day

Photo Credits

  • Goodshoot/Goodshoot/Getty Images

About the Author

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.