The stock market is the perfect way to find financial opportunities and 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.
2. Invest in 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.
4. Use Options for Leverage
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.