What’s your New Year’s resolution this year?
For many individual investors, improving their bottom-line performance is a goal in 2022. A new year is a good opportunity to wipe the slate clean and conduct a post-analysis of your trades in the past year to see where you can improve.
After all, the stock market is impossible to predict or master—which means you can always get better.
If you’re new to investing and haven’t traded stocks before, then this is a great time to get started!
You probably noticed news stories about record numbers of retail investors opening new brokerage accounts in the past 2 years, and for good reason: people are realizing you can make life-changing money in the market and you don’t need a lot of time or money to get started.
Here are 4 tips that can help any investor—new to stocks or experienced trader—boost their bottom line in 2022.
Want more tips like this? IBD Digital has a huge selection of educational resources that can help you become a smarter investor, including how-to videos, interactive webinars, podcasts and much more. Join today and get your first 2 months for only $20.22—over 70% off the regular price.
Tip #1: Right now, leading stocks are rotating faster than before. Build a fresh watchlist of new stocks showing superior fundamentals.
After the coronavirus market crash in 2020, the market took off and leading stocks like Zoom (ZM) and Peloton (PTON) made huge triple-digit gains with barely a pullback along the way.
But in 2021, the market was not so easy. Frequent bouts of sector rotation meant that former leaders were no longer in favor while money rotated to new leaders in different industry groups.
If you owned former leading stock Amazon (AMZN), for example, you were essentially flat for most of 2021. As for Zoom and Peloton, they’ve given up an enormous chunk of their 2020 gains.
So how can you identify 2022’s new leaders?
A good place to start is the IBD Sector Leaders® list, which is a very stringent list containing only the top stocks from the top sectors. These stocks are pre-screened for superior fundamental characteristics like earnings and sales growth, which can save you a lot of time researching those important traits.
You can access the IBD Sector Leaders® list if you’re a member of IBD Digital. If you’re not a member yet, you can join today and get instant access to IBD Sector Leaders plus 13 other members-only lists full of leading stocks in categories like IPOs, Large Caps and more.
Tip #2: Use fundamental analysis to determine which stocks to buy, then use technical analysis to determine when to buy and sell.
Fundamentals like earnings and sales growth, return on equity and pre-tax margins are all key to identifying the top growth stocks. (Want an instant analysis of a stock’s fundamentals? Try the IBD Stock Checkup®–it’s another great feature available to IBD Digital members.)
Once you’ve identified a stock to buy, you have to know the best time to buy them. That’s where using technical analysis comes in.
Technical analysis, or analyzing the chart action of a stock, is key to pinpointing the optimal times to buy and sell. Take Tesla stock (TSLA) for example.
Case Study: Tesla Stock in 2021
TSLA came into 2021 trading at 705.67, then quickly ran up to an intraday high of 900.40 by January 25. That’s a 27.6% gain in less than a month.
So what happened if you missed that strong initial run and bought near the highs (where there was no proper buy point) to avoid missing out?
Tesla went into base-building mode from late January all the way through to late October, when it finally broke out of a long cup pattern. During that time, TSLA stock corrected as much as 40%.
So if you bought near those early January highs when there was no proper buy point from a base, you could have been down as much as 40% on your position! That’s a heavy hit to withstand, and a risk that very few can (or should) tolerate.
With TSLA stock trading at over 1,000 again, what are the takeaways from this year’s action?
- Using technical analysis would have showed you the proper day to buy TSLA was on the breakout from a cup pattern on October 22, 2021.
- Sitting through that 9-month base would have meant your po
ition was essentially “dead money” while struggling to recover initial losses; that money could have been put in other stocks that were breaking out and making fresh gains.
- No matter how bullish you are on a stock’s long-term outlook, use the chart to determine smarter, lower-risk entry points.
Tip #3: Time the market by keeping a close eye on the market trend and adjusting your percentage invested at key times.
Research shows that 3 out of every 4 stocks follows the direction of the overall market, either to the upside or the downside. If you’re buying new stocks during a downtrend, you’re swimming against the tide and hurting your chances for success.
That’s why it’s always important to check the market trend on the homepage of investors.com and wait for the market trend to say “Market in Confirmed Uptrend“” before making new buys.
(It’s important to note that only IBD Digital members will be able to see the market trend—it’s a key benefit of joining IBD Digital to help you stay on the right side of the market action. You can join today and get your first 2 months for only $20.22.)
When the market is in a confirmed uptrend, you can be 100% invested if your risk tolerance allows and you have identified strong stocks to buy.
When the market is downgraded to “Uptrend Under Pressure,” you may want to consider reducing your exposure and selling your stocks that are the worst performers. For example, you can go from 100% invested to 50% invested, 50% cash while still holding your highest-conviction stocks.
When the market is further downgraded to “Market in Correction,” some traders will go 100% to cash; it’s also possible to sell most stocks and maintain a very low percentage invested if they have long-term gains on a big winner.
However, it’s important to follow a key defensive sell rule, no matter the market trend: Sell a stock if it falls 7-8% the price you paid for it. That will help keep losses small and let you live to fight another day.
Tip #4: Become an IBD Digital member—right now, it’s over 70% off the regular price.
If you want to sharpen your investing skills and give yourself an edge in the market, now’s the time to join IBD Digital. One subscription gives you access to IBD Digital’s premium content, including:
- Stock picks in categories like large caps, IPOs and more
- Proprietary ratings for 5,000+ stocks
- Daily expert analysis and market trend updates
- Time-saving tools like the IBD Stock Screener and Stock Checkup
- Educational resources like webinars, podcasts, how-to-invest videos and more
- Best-in-class customer service and support
If you join IBD Digital today, you can get your first 2 months for only $20.22—that’s almost $50 off the regular price.
For a limited time as part of this deal, IBD will send you a free copy of one of the most important investing books of all time, How to Make Money in Stocks by William O’Neil. The book alone costs about $20, so you’re getting a huge discount on a wealth of investing knowledge!
So which matters most: technical analysis, fundamental analysis or market timing?
IBD’s in-house research time has studied over 100 years of market data to determine what makes a winning stock.
The research shows that to have the best chances of being successful trading stocks, you need to combine fundamental analysis, technical analysis and market timing.
That’s the foundation of everything you’ll find on investors.com. IBD’s proprietary investing system uses all three elements to maximize returns in uptrends and protect profits in downtrends.
That’s why IBD’s methodology has a decades-long track record of outperforming the indexes.
When you join IBD Digital:
- You’ll get 14 different stock lists full of current leaders—no need to scan thousands of stocks looking for the best ones.
- You’ll also get interactive tools, expert analysis and a screener to help you recognize when strong stocks are nearing a proper buy point.
- You’ll always know what the market trend is, since it’s updated daily.
Make 2022 the year that you take your trading to the next level. Learn how to invest like a pro by joining IBD Digital today for only $20.22.
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