Money Games Information

Picking winning stocks is not an easy job. True there are certain investors that tend to make it look easy, the best example being the great Warren Buffet. However all investors (including the professionals) choose bad stocks. The question to be asked is why to the professionals pick far fewer bad stocks than amateurs?

Photo: thesunsfinancialdiary.com

Stock picking strategies can seem like an enigma. What exactly are they? Well to cut a long story short a trading strategy is simply a set or rules that must be followed when executing a trade. A strategy is nothing more complicated that a checklist of criteria that need to be met in order for the trader to invest in a stock, currency or commodity.

Professional traders are much more successful because they have much more detailed strategies than individuals. For example a lone trader might decide to buy a stock after piecing together the following information:

- he has seen a tip to buy the stock in a newspaper

- the company has consistently made profits over the last 4 years

- the stock price has fallen slightly for the last 3 days, making the stock look cheap

The above may seem to indicate the stock is a good investment. However a professional trader would most likely have a much greater number of checks made. Example may include:

- price earnings ration of over 20

- the 1 month moving average price falling below the weekly average

- dividend yield increasing to 7%

- Current Ratio of over 5

In reality a professional trader would have hundreds of indicators or checks that need to be made before deciding whether to invest in a particular position.

The real secret

The way professional traders can process such large volumes of information is by using specially designed software that will be pre-programmed with all the relevant indicators. As a result they can program in thousands of checks to be made that would be impossible to check manually if done by hand.

The output of such computer programs is a short list of stocks with a very good potential to perform well in the future. Only recently has such stock picking software become available to amateur investors.