5 Ways To Make a Fortune with Stocks: Make A Stock Fortune

The stock market is the perfect way to make a stock fortune and find financial opportunities to make money.

If you’re really interested in making a fortune trading stocks, here are a few practical tips that have used by several people to make a fortune in the stock market.

1. Buy Well Known Companies

A traditional strategy to make a fortune with stocks is to buy well stablished companies and hold them for a long time.

The reason why this woks is that great companies continue to make money throughout the years. Even if there is some fluctuations, over time these big companies make a good return on investment.

There are other advantages too: big companies normally pay better dividends, which can help you make even more investments.

Read Also:

Investing in Growth Stocks

Make a fortune with call options!

Making Money With Technical Indicators

How Much Money Can You Make With Option Trades?

The ideal stock selection for covered calls

How to Detect Stocks Going Up?

2. Make a Stock Fortune with Small Companies

A different strategy corresponds to invest in small or mid-sized companies.

A small company, when well managed, can grow very quickly and achieve a lot of financial gains for your portfolio.

For example, Netflix once started as a small company. But its stock value has multiplied by 300 in just a couple of years, making it a great investment for people who believed in the company.

3. Use Technical Indicators

A different style of trading is the one that uses technical indicator.

A technical indicator is a function applied to the price or volume of a stock. This function can be usually displayed in a chart.

There are several indicators that can be used successfully for stock trading.

One of them is to look for crossings of simple averages of the previous days.

If you use technical indicators consistently, you can make a good life by buying stocks at favorable prices, and selling them at target values.

Using technical indicators involves analyzing historical price and volume data to identify patterns, trends, and potential trading opportunities in financial markets. Here are some additional steps to effectively use technical indicators:

  • Understand the Indicator: Start by thoroughly understanding the specific technical indicator you plan to use. Each indicator has its own calculation method and interpretation. Common technical indicators include moving averages, relative strength index (RSI), stochastic oscillator, MACD (Moving Average Convergence Divergence), and Bollinger Bands, among others. Study the indicator’s formula, parameters, and how it generates signals.
  • Define your Trading Goals: Determine your trading goals and timeframe. Are you looking for short-term trades or long-term investments? Do you want to identify trend reversals, overbought or oversold conditions, or price breakouts? Clear objectives will help you select the most relevant indicators for your strategy.

Choosing Indicators to Achieve Stock Fortune

Avoid using too many indicators simultaneously, as this can lead to conflicting signals and analysis paralysis. Instead, focus on a few indicators that complement each other and align with your trading goals. Consider indicators that measure price momentum, trend direction, volume, and volatility.

  • Set Indicator Parameters: Most technical indicators have default parameters, but they can be customized to suit your trading style and the characteristics of the market you’re analyzing. Experiment with different parameter values and assess their impact on indicator signals. However, be cautious of over-optimizing parameters based on historical data, as it can lead to unreliable results in real-time trading.
  • Combine Indicators: Consider using multiple indicators to confirm signals and increase their reliability. For example, combining a trend-following indicator like a moving average with a momentum oscillator like RSI can provide a more comprehensive view of market conditions. Ensure that the indicators you choose complement each other rather than duplicate information.
  • Backtest and Validate: Before applying technical indicators in live trading, backtest your strategy on historical price data to assess its performance and potential profitability. This process helps validate the effectiveness of your chosen indicators and parameter settings. Backtesting also allows you to understand the strengths and weaknesses of your strategy, helping you make necessary adjustments.
  • Consider Market Context: Always analyze technical indicators in the context of broader market conditions. Factors such as economic data, news events, and market sentiment can influence the effectiveness of indicators. Avoid relying solely on technical indicators without considering fundamental analysis and overall market trends.
  • Practice Risk Management: Technical indicators can provide valuable insights, but they are not foolproof. Always apply proper risk management techniques to protect your capital. Set stop-loss orders to limit potential losses and establish profit targets to secure gains. Consider position sizing, diversification, and risk-reward ratios to manage your overall portfolio risk.

4. Use Options for Leverage and Stock Fortune

A way to make quick money in the stock market is to use options.

An option is the right to buy (or sell) a stock if it move above (or bellow) a particular value during a certain period of time.

For example an IBM 80 call expiring in 20 days gives you the right to buy 100 shares of IBM if it goes above $80 during the next 20 days.

Using options, you can make a lot of money with a small investment. Since you’re in a position just for a few days, options cost much less than the corresponding stock. For example, buying 100 IBM shares can cost $8K, while the option may cost $500 or less.

The risk of options is that they can expire without any profit, or it may lose all value when close to expiration. These are risks that you need to understand and use to your advantage.

5. Sell Covered Calls

Another strategy to make lots of money in the stock market is to sell options to capture the premium.

This can be done in many ways, but the most reliable is selling covered calls.

A covered call is a trade where you buy a number of stocks, and then sell call options base on the underlying stock. The call is said to be covered because even if the option loses a lot of value, it is still covered by stock, so no money is lost.

If you follow a good covered call strategy, you can make a lot of money practically every week. It is a relatively low risk and with good reward if you are consistent.

Selling covered calls is a strategy that involves selling call options on stocks you already own. It can be used to generate income from your existing stock holdings. Here’s a step-by-step guide on how to sell covered calls:

  • Identify Suitable Stocks: Look for stocks in your portfolio that you are willing to potentially sell at a higher price. These stocks should have options available for trading, with sufficient trading volume and liquidity. Consider stocks that you believe have limited upside potential in the near term.
  • Determine the Strike Price and Expiration Date: Decide on the strike price at which you are comfortable selling your shares if the option is exercised. Choose a strike price that is slightly higher than the current stock price, but still within a range that you find acceptable. Also, select an expiration date that gives enough time for your desired price movement but aligns with your investment goals.

Assessing Premiums on Options to Make a Fortune!

Evaluate the option premiums available for the selected strike price and expiration date. Premiums represent the income you will receive for selling the call options. Higher premiums offer more income but may also indicate higher risk or volatility. Consider the balance between premium income and potential stock appreciation.

  • Open a Trading Account: If you don’t already have a brokerage account, open one with a reputable brokerage that supports options trading. Ensure that the brokerage allows you to sell covered calls and provides the necessary tools and resources for options trading.
  • Place the Trade: Once you have selected the stock, strike price, and expiration date, place the trade with your brokerage. Specify that you want to sell covered calls on your existing stock holdings. Provide the required information, including the stock symbol, number of contracts to sell, strike price, and expiration date.
  • Review and Manage Positions: Monitor the performance of your covered call positions regularly. If the stock price approaches or exceeds the strike price, the call option may be exercised, and your shares will be sold. Consider your investment goals and adjust your positions accordingly. You can choose to buy back the call options, roll them to a later expiration date or higher strike price, or let them expire worthless and collect the premium.
  • Repeat the Strategy: Selling covered calls can be an ongoing strategy to generate income from your stock holdings. As options expire or are exercised, you can continue to sell new covered calls on the remaining shares. Monitor market conditions, stock performance, and option premiums to make informed decisions for each new trade.

Related Posts