There are lots of different trading styles out there: Momentum, Aggressive Growth, Value, Growth & Income, and more. Some of these are more conservative while others are more aggressive.
But which one works best? Let's take a look.
Momentum Style
Momentum traders look to take advantage of upward trends (or downward trends) in a stock's price or earnings. They believe that these stocks will continue to head in the same direction because of the momentum that is already behind them.
We've all heard the old adage, "the trend is your friend". And who doesn't like riding a trend? In fact, if somebody were to ask you what your best stocks are, you would likely name the ones moving up the most in your portfolio.
This, of course, would include stocks making new highs. Especially since stocks making new highs have a tendency of making even higher highs.
Our momentum strategy, fittingly called 'New Highs' , focuses on that very thing by selecting stocks with the best momentum characteristics.
How Has It Done?
• Over the last 16 years (2000 thru 2015), using a one-week holding period, this strategy has shown an average annual return of 51.9% vs. the S&P 500's 3.8%.
• And so far in 2016 (thru 6/24), it's already up 47.2%, crushing the S&P.
So is this the best style?
Maybe for some. But maybe not for others.
This momentum style strategy is an exciting one to trade. But for some, the high flyers and fast movers aren't the kinds of stocks they want to get into.
Maybe getting into stocks that are lower in their price recognition cycle or finding undiscovered gems is more to your liking.
So let's take a look at the value style.
Value Style
Value investors and traders favor good stocks at great prices over great stocks at good prices. This does not mean they have to be cheap in price though. The key is the belief that they're undervalued. That they are, for some reason, trading under what their true value or potential really is. The value investor hopes to get in before the market 'discovers' this and moves higher.
Some may think that value investing is boring. Or that you have to sacrifice returns. But neither could be further from the truth. In fact, value investing has proven to be one of the most successful forms of investing over time.
Value investing became famous from legendary investors Benjamin Graham and more recently Warren Buffett. Obviously, they know something. And they do.
How Has It Done?
• Over the last 16 years, using a one-week holding period, this strategy has shown an average annual return of 49.8% vs. the S&P 500's 3.8%.
• And so far in 2016, it's up 57.1%, outperforming the S&P by more than 20X as much.
This strategy also does well using a four-week holding period, which is ideal for less active traders.
And since many value strategies are often less volatile, the smoother ride this style can provide, while still outperforming the market, may be just what you're looking for.
Growth & Income Style
Or maybe a Growth & Income Style approach with core holdings that pay income producing dividends is what you're really after.
This kind of strategy will tend to focus in on more mature companies with solid revenue and consistent payouts.
You'll have a longer time horizon with this style (at least 12 weeks), especially since you'll want to hang onto your stocks long enough to receive the dividend.
A perfect example of this is our 'Growth and Income Winners' strategy, which has shown an average annual return over the last 16 years of 18.6%, with a win ratio of 74%.
Then again, the allure of getting in on a newer company and watching it blaze a trail of success, as an Aggressive Growth Style strategy will do, may be your goal instead.
Aggressive Growth traders are primarily focused on stocks with aggressive earnings growth or revenue growth (or at least the potential for aggressive growth).
You'll often find smaller-cap stocks in this category.
And while this style will typically require a more hands on approach to monitor how these companies are doing, it can be well worth it when it's hitting its stride.
Like our 'Small-Cap Growth' strategy is doing, which has shown an average annual return over the last 16 years of 64.0%.
And the #1 Trading Strategy Is... the strategy that's right for you!
No one style or strategy is better than the other. They're just different from each other.
And that's fine.
So the number one trading strategy is the one that fits your style, and that picks the kinds of stocks you want to get into.
Why?
Because if you find yourself getting into stocks that are not in alignment with who you are or want to be as a trader, you'll find yourself dropping that strategy the moment the market hits a rough patch. Or talking yourself out of winning trades altogether, because you're uncomfortable being in stocks that don't fit your style.
You Can Beat the Market
As you can see, beating the market isn't just for the pros. Anybody can do it with the right strategy.
But the best trading strategy in the world won't make you any money if you don't use it.
It all comes down to knowing what works, and doing what works.
If you know what strategies work, you'll have the confidence to use them. And following a proven strategy that works can transform your portfolio.
To build confidence in your trading, remember to first:
1) Identify what kind of trader you are or want to become. This will help you find the style(s) that are right for you. And don't worry about fitting perfectly into one style or another. Many people will be a combination of several styles rolled into one.
2) Once you understand the different styles and where you fit in, you can then concentrate on what kinds of strategies will help you pick those stocks so you'll always get into the right ones.
3) Don't give up. As mentioned above, the most successful trading strategies work best when you use them. Once you've identified your style and the method to pick those stocks, you'll be beating the market no matter what it's doing.
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NB:
i. The new HIGH strategy is the easiest. A 1 man show even residing offshore or out of the country, can do it successfully, when fine tuned over time with a few all-important steps.
Most importantly, the very 1st step is, u must know your target stock is edi in a corner condition n is ready to fly high.
Mkt darlings r GCB, FRONTKN, DAYANG, master, REVENUE, DSONIC, CARLSBG, ALLIANZ, DUFU
N coming next r KRONO, MPI, NOTION, VITROX dll ...
ii. The value seeking type needs a big team n time to do well, especially having to choose from thousands of stocks on offer at any 1 time on the mkt every cycle.
Bottom line is, for me, the new HIGH strategy has very high success rate every cycle at Right Timing
n achieving high CAGR on all the 2 cycles per annum every year.
Isn't that wonderful ?
Allow me to give u the BEST last piece to this stock mkt money making puzzle, i.e.
Play with the foreign funds. Only they can make things happen on KLSE.
Go with 2nd UPPER liners > rm2 n a few 2nd Lower > rm0.80
Penny, u play for FUN like with jackpot Machine with your hard earned money.
How to know the foreign funds r in ?
If u sell your beautiful stocks n the counter buyers r # 30 something, u know edi.
